MINUTES OF THE MEETING OF JOINT SUBCOMMITTEE ON GENERAL GOVERNMENT ASSEMBLY COMMITTEE ON WAYS AND MEANS AND SENATE COMMITTEE ON FINANCE Sixty-eighth Session March 8, 1995 The meeting of the joint subcommittee on General Government of the Assembly Committee on Ways and Means and the Senate Committee on Finance was called to order at 8:05 a.m. on Wednesday, March 8, 1995, Chairman Sandra Tiffany presiding in Room 321 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. ASSEMBLY COMMITTEE MEMBERS PRESENT: Ms. Sandra Tiffany, Chairman Mr. Dennis L. Allard Mrs. Maureen E. Brower Mrs. Jan Evans Ms. Chris Giunchigliani Mr. Bob Price SENATE COMMITTEE MEMBERS PRESENT: Senator Lawrence E. Jacobsen Senator William R. O'Donnell Senator Bernice Mathews STAFF MEMBERS PRESENT: Mark Stevens, Fiscal Analyst Robert A. Guernsey, Principal Deputy Fiscal Analyst Brian Burke, Program Analyst Chairman Tiffany provided an overview of the particular areas which would be addressed during the joint committee meeting. Karen Kavanau, Director, Department of Information Services (DIS), made opening comments. She stated in 1988 prior to her tenure with DIS the legislative auditors published the results of an operational audit on the Department of Data Processing, the predecessor to DIS, covering the period 1983 to 1987. During the 1991-93 legislative interim session, a legislative subcommittee on privatization evaluated the department's role and responsibilities. The results of the effort were published in Legislative Report 93-18. In 1992 the Governor hired KPMG Peat Marwick, a national consulting firm, to evaluate the status of information sources in the Executive Branch. In his 1993-95 Executive Budget the Governor proposed dramatic changes to DIS, its responsibilities, and its organizational structure. While the legislature did not approve all of the Governor's proposals, it significantly expanded the department's role through statutory changes and the addition of two new divisions formerly from other agencies. The 1993 legislature passed Senate Concurrent Resolution 5 mandating the department to undertake ten studies aimed at improving utilization and efficiency of information resources in the Executive Branch. In response to SCR 5 hundreds of people expended thousands of hours evaluating and analyzing the current environment, trends, needs, best practices and anything else remotely connected with information technology in the Executive Branch. As a result, in 1994 the Department of Information Services produced the Strategic Plan for Information Resources and Information Technology (SPIRIT). For the previous ten years, state decision makers analyzed ways to improve and ensure the cost efficiency of information resources within the Executive Branch. There were remarkable similarities among the studies. Recommendations pointed to a need for dramatic improvements in the deployment, acquisition, and utilization of technology in the Executive Branch. While a number of improvements had been made within DIS in the past, the time had come to address the Executive Branch as a whole. Ms. Kavanau commented on testimony which had occurred in several subcommittee meetings comparing state government technology projects to projects in private sector. Government is not allowed to handle information technology projects like the private sector. Each information technology project has three major phases, regardless of whether they are in government or in private sector: a needs assessment, phase I; a definition of requirements, phase II; and the actual implementation of a solution, phase III. A needs assessment documents what the information system is supposed to do. During phase I the scope is rarely well defined. Therefore, the cost of a needs assessment and future phases are extremely difficult to estimate. Ms. Kavanau remarked the requirements definition, phase II, is the documentation of how the system should operate, providing detailed specifications on which the system is developed. After the needs assessment is completed, the requirements definition phase requires a great deal of analysis. The third and final phase, implementation, cannot be accurately defined and costs cannot be estimated with any degree of certainty until the first two phases are completed. Ms. Kavanau pointed out government is usually required to estimate the entire cost of all three phases many years in advance and is forced over and over again to provide meaningless estimates for systems that are not fully defined for years. Private industry does not have to make cost estimates before having all the needed information. Private industry takes one phase at a time, building subsequent phases on what is learned from preceding phases. Another significant difference between how government must approach information systems as compared to private sector is the number of approval processes required and the time each step takes. Government agencies must develop a Request For Proposal (RFP), then deal with the inevitable appeals process. It should be noted that vendors typically appeal in the hopes of a second shot, not because they thought they truly had been mistreated. Agencies must have approval by IFC and the board of examiners. If federal funding is sought for the project, the cognizant federal agency must approve an advance planning document. In the private sector, once the decision is made to develop and acquire a system and the budget is approved, the private entity is unincumbered by the myriad of obstacles facing government. Ms. Kavanau noted many information system projects initiated in the Executive Branch prior to 1993 had not been handled well. DIS had not yet implemented changes to improve the situation. Prior to 1992 the department did not become involved with projects until the actual award of a contract. Presently policies and procedures are in place to preclude these types of mistakes. There is a much tighter RFP process, better contracts are written through a contract administrator, and agencies are required to follow much more structured approaches to ensure good results. Ms. Kavanau said instead of forcing agencies to develop unrealistic cost estimates without good information on which to base them and funding agencies individually based on bad estimates, DIS recommended the legislature consider creating a reserve fund within the Department of Administration which would not be available to anyone without IFC or legislative approval. As agencies progress from phase to phase during a project, they could submit funding requests for the next phase based on the latest information available to the Department of Administration. The Department of Administration in turn could forward those recommended funding requests to IFC or the legislature where requests could be justified through testimony. Ms. Kavanau remarked DIS had evolved from a service bureau selling computer cycles and programming services to an agency providing statewide leadership and initiatives such as procurement review, RFP, contract administration, statewide planning, consulting services and statewide projects that promoted data sharing, resource sharing, and more flexible access to the general public. For the first time information technology was being planned and deployed with an enterprise or statewide perspective. The enterprise perspective eliminates duplication and fragmentation by taking all agencies and all existing resources into account each time a new system is being considered. Time was not available to develop new funding mechanisms, but they would be in place by the next biennium. In the meantime there were efficiencies to be gained by moving forward even though the funding mechanisms were still in transition. As an example, the Planning and Research Division of DIS was established in 1989 to perform statewide activities, including procurement review, and planning and setting policies for the Executive Branch. The majority of its costs were absorbed only by a few agencies; it was not spread across the Executive Branch. A more appropriate funding mechanism would be to bill those functions to all agencies served, with the exclusion of the university system and the National Criminal Informational Center application. In closing, Ms. Kavanau pointed out SPIRIT was the blueprint for enterprise-wide improvement. Until technology was viewed from the enterprise level, individual agencies would continue deploying dissimilar systems and hiring more and more staff to support them. Chairman Tiffany commended Ms. Kavanau and her staff for their work. She asked if the money supporting the reserve fund concept would come from agencies requesting a system, general fund money, federal money, or fee money. Ms. Kavanau explained the reserve fund concept should not be confused with an agency's reserve fund. It was not proposed the fund be administered by DIS. Instead of the legislature funding individual projects, agencies would pool their general fund allocations and authority into a single pool to be reserved in the Department of Administration but not accessible by anyone without direct legislative or IFC approval. Ms. Kavanau pointed out a specific example whereby the original advance planning document of the Division of Child and Family Services was sent to the federal government in December 1993. They required a cost estimate. At that point it was not known what the system would look like. In May 1994 the federal government provided conditional approval. In June 1994 the plan went before IFC. An RFP was released in September 1994. The board of examiners approved the plan in December 1994. Phase I began in 1995, with an anticipated completion date of May 1995. Ms. Kavanau explained under the reserve funding concept, when the first RFP was released, a needs assessment would be performed, phase I. The requesting body would go to the Department of Administration and request money out of the pool that the legislature established for information technology projects. The appropriate paperwork would be developed to bring to the legislature. The request would be for the phase which could best be defined. The rest of the phases would not be anticipated years in advance. After the RFP was let and moneys were transferred to the requesting agency's budget, money would be available to develop the first phase. After the completion of the first phase, an estimate could be developed for the detailed system specifications. With the approval of the Department of Administration, a request for approval by the legislature would be sought. Instead of coming to the legislature three to six years in advance of the project completion and requesting funds, during which time the scope of the project may have changed, each phase could be addressed separately. When Mrs. Brower inquired if a long-range plan and cost estimate would accompany the phase-by-phase implementation of the projects, Ms. Kavanau responded affirmatively. Mrs. Evans pointed out the legislature builds a two-year budget and therefore needed a definitive cost estimate for the budget. Ms. Kavanau commented if the agency was being funded, the money could be added to a pool. Ms. Giunchigliani inquired if the funding did not reach the pool until the RFP, in what way would time be saved. Ms. Kavanau responded time would be saved in terms of appearances of agencies going over perceived problems in system development. Ms. Giunchigliani asked if there would be a need for agencies to appear before the board of examiners and IFC. Ms. Kavanau explained the time saved would be in committee meetings, subcommittee meetings, and IFC presentations. As legislators have looked back through past budgets, they have asked why estimates which had been provided were no longer accurate. More accurate estimates would cut the time spent by legislators trying to determine why budgets appeared to be over schedule or over budget. Ms. Giunchigliani queried what dollar amount would go into the pool. Pamela A. Case, Deputy Director, Department of Information Services, explained the amount spent yearly on technology based on historical figures would be set aside for administration as projects developed as opposed to estimating years in advance what the cost would be. Child and Family Services was a good example. They were forced to provide a figure for the total project before there was an understanding of the scope and magnitude of the project. The reserve fund concept would provide a pool for technology without being specific to the agency or project as the projects developed. When Ms. Giunchigliani inquired if the historical amount would be determined by CIP or one-shot appropriations, Ms. Kavanau replied both would be included. The fund would ensure against over funding. An agency would not estimate high to ensure the project was adequately funded. Mr. Price thanked Ms. Kavanau for the presentation. He expressed concern with putting money into a fund with no oversight. Ms. Kavanau commented she was confident legislative staff and the Governor's staff could develop good ideas to minimize exposure. Mr. Allard expressed concern about putting general fund money into a pool which IFC would distribute. Ms. Kavanau remarked some states, including Oregon, had established a legislative body to review projects and make recommendations to IFC. Mr. Allard emphasized power would be taken away from the total legislative body and added to IFC for the distribution of funds, which might not be constitutionally or statutorily correct. Senator Mathews expressed appreciation for the work performed by DIS but added she would be cautious about how much authority should be given to one body to run an entire state. Ms. Kavanau explained no single department in the Executive Branch would have any access to the fund without legislative input. Mrs. Evans stated she felt the overall concept had merit, but she expressed concern for the potential for disagreements between DIS and other agencies. She suggested discussing with Mr. Comeaux the possibility of setting up a separate budget account on technology resources in the Department of Administration so that three agencies would be involved with the projects. Ms. Kavanau indicated the suggestion was to have the Department of Administration administer the fund. DIS' role would be to help agencies justify their needs. Chairman Tiffany expressed her appreciation for DIS making the foregoing suggestions. She requested staff to discuss with DIS and the Department of Administration the development of a plan as a first step. There was a legislative standing committee for computer applications, and perhaps the committee could be expanded to include DIS projects. INFORMATION SERVICES - DIRECTOR'S OFFICE - PAGE 609 Chairman Tiffany requested information on the clerical positions in the director's office of DIS. Ms. Kavanau said the intent of DIS was to maximize the functions of the clerical staff by pooling them into a single place to provide backup services for each other as opposed to assigning one clerical position to an agency. Routine functions like travel claims, BTA's and taking messages for staff could be done by whomever was available. DIS was also trying to redirect inquires to a single place to provide consistency for the customer. Chairman Tiffany requested information on the internal distribution of costs which had been shifted. David L. Lawson, Chief Accountant, Department of Information Services, explained the cost effect would be neutral to agency customers. For example, the Systems and Programming Division had three clerical positions assigned to it and paid the full cost for those positions. If the three clerical positions were pooled to the director's office, the same amount would be assessed back to the Systems and Programming Division. Chairman Tiffany remarked assessment decreases in agencies were offset by assessment increases in Systems and Programming, Facility Management and Telecommunications. Brian Burke, Program Analyst, Legislative Counsel Bureau Fiscal Analysis Division, explained although the correction was cost neutral to DIS, it appeared certain agencies within DIS, because of the FTE allocation, would pay additional costs while others paid a lower cost. Mr. Lawson agreed with Mr. Burke's assessment. Ms. Kavanau pointed out if the costs were pooled and assessed to all divisions, customers would not be paying for one FTE but would be paying their share of the pool for clerical help. Chairman Tiffany requested information on the assessment revenue. Mr. Lawson stated a corrected set of numbers had been provided in full committee to Mr. Burke in February 1995. James W. Manning explained the Budget Office had provided updated figures for the revenue requirements to the Assembly Ways and Means Committee. Chairman Tiffany asked for justification for the three positions in contract administration. Chairman Tiffany also inquired as to how the information systems specialist currently working in the director's office is being funded. Ms. Kavanau explained the information systems specialist was a temporary relocation as a result of SPIRIT. The function provided by the position is agency-wide. Costs for the position are more appropriately charged as overhead because the position provides services to many agencies. In the past all labor costs had been assessed to customers either directly or indirectly. The attention of DIS is now directed to activities enterprise-wide rather than activities which are directly billable to a particular agency. When Chairman Tiffany inquired if the position would be returned to programming, Ms. Kavanau responded affirmatively. Ms. Kavanau remarked it would be helpful to find out from staff what the concerns were regarding the pooling of clerical positions. Chairman Tiffany asked if there were further questions regarding the Director's Office. There being none, Chairman Tiffany closed the hearing on budget account 1373 and opened the hearing on budget account 1370. INFORMATION SERVICES - RESEARCH & PLANNING DIVISION - PAGE 615 Chairman Tiffany requested information on the consolidation of the Customer Service Division and the elimination of the Chief of Planning and Research. Karen Kavanau, Director, Department of Information Services, provided copies of two organizational charts to the joint subcommittee members (Exhibit C). Page 1 of Exhibit C depicted the current organizational structure with five divisions. A proposal was being made to consolidate the five divisions into two divisions. Ms. Kavanau pointed out of the five divisions, only three divisions had chiefs. The divisions being addressed for consolidation were the Systems and Programming Division and the Planning & Research Division. Technology had forced the two divisions to work together in dealing with existing systems, new systems, and consulting services. The new division would need to respond as a whole to customers. Ms. Kavanau stated the recommendation to consolidate from five divisions to two divisions would eliminate one unclassified chief position. The position would appear to be the Planning and Research Division Chief. The consolidation would, in fact, eliminate the three chiefs from Systems & Programming, Planning & Research, and Facility Management. Telecommunications and the Communications Division did not have chiefs when they were moved to DIS in 1993 by the legislature but had managers. Page 2 of Exhibit C depicted the consolidation as proposed by DIS. The two remaining chiefs of Customer Services and Information Delivery Services could adequately absorb the management responsibilities held by the three eliminated chiefs. Chairman Tiffany asked why the agency needed four new planning analysts when it was able to function with zero previously. Ms. Kavanau pointed out the department was not functioning well without the positions. A backlog had been created. The positions were the front line of DIS to customer agencies. They analyzed the needs of the customer, directed the customer in the steps they needed to take, drew upon the existing resources in other state agencies, provided advice, assisted in the compilation of RFP's and contracts, assisted in scheduling the correct application programmer support, and coordinated DIS efforts. In the past charges were made for each person sent out to provide these services. The proposal would be to absorb the two new positions into the planning function which would be assessed evenly among all other agencies. The new assessment methodology was not included in the budget. Regarding the vacancies, the two vacancies have been filled. The department wanted to avoid training for the positions. Ms. Kavanau remarked agencies were required to go through procedures which had not been required in the past, including documented needs assessments and documented requirement definitions in order to provide written justification when necessary. Chairman Tiffany inquired if the reorganization did not occur, would the chief of Planning and Research still be eliminated. Ms. Kavanau replied the vacant position was actually the Chief of the Facility Management Division and as such was in charge of the systems programmers. Mr. Dunn, the former Chief of the Facility Management Division, retired in July 1994, and it was decided not to fill the position. If the reorganization did not occur, the flexibility would be there to fill the position. Chairman Tiffany inquired if the reorganization did not occur, would DIS go to five chiefs. Ms. Kavanau responded the department would not go to five chiefs. There would be no reason to manage Telecommunications, Communications and Facility Management separately. Ms. Giunchigliani requested an explanation of why Mr. Dunn was hired as a contract employee after his retirement, which was bad public policy. Pamela A. Case, Deputy Director, Department of Information Services, explained Mr. Dunn was hired back through the Master Services Agreement as an employee of Prodata and was working at the direction of one of the deputy chiefs. He was hired to do temporary backlog work because of his 30 years of experience which could not be filled through any other contract laborer. Ms. Kavanau added an attempt had been made to contract with Mr. Dunn for a lower rate, but the new PERS rules would not allow an agency to contract directly with an employee. As a result, Mr. Dunn had to become an employee of a company, and DIS had to pay the overhead in order to utilize his services. Mr. Price pointed out the same subject matter regarding the hiring of ex-employees was on the front page of every newspaper in Nevada, and legislators were being criticized for the practice. He suggested there being only one person in the country who was qualified to fill the position was not a good excuse for contracting with ex-employees. He requested the information from PERS which prohibited this type of action. Senator Jacobsen expressed reservations about the reorganization of DIS. He asked what type of enforcement would be available if the system did not work. Ms. Kavanau replied there were documented needs assessments which were monitored closely as the process was being developed. DIS would not wait until the end to see if the system worked. The state was using more vendors than in the past, which provided good leverage. With the documentation of good contracts, the contractor could be held responsible if the terms of the contract were not met. Checks and balances would preclude coming to the end of a project before finding out it did not work. Senator O'Donnell expressed his frustration and disappointment with SPIRIT and SCR 5. As chairman of SCR 5, he had yet to see a vote taken on SCR 5. He asked if a letter had been written stating DIS wanted the next meeting to be in June 1995. Ms. Kavanau indicated at the July 29, 1994, meeting of the Information Technology Advisory Board, which Senator O'Donnell was the chairman but he did not attend, the board attempted to vote on supporting SPIRIT. The board was advised by the deputy attorney general since it was not an action item on the agenda, a vote would be inappropriate. The acting chairman of the meeting, Perry Comeaux, then asked the deputy attorney general how unanimous support could be shown for SPIRIT for the record. The deputy attorney general's comments were, "You just did." Senator O'Donnell inquired if a document had been approved at the meeting or was the support verbal. Ms. Kavanau stated the meeting had been planned for many months. The document was the SPIRIT document itself, which was distributed to the members of the committee and had also been mailed to the members' homes. Senator O'Donnell asked if SPIRIT had changed since the meeting. Ms. Kavanau replied one change had been made. Senator O'Donnell asked what the change was. Ms. Kavanau explained the recommendation was for the attorney general's office to be part of the state's mainframe data center. Following the publication of the document, the attorney general suggested the attorney general's office more appropriately belonged with the Public Safety data center, which included the Department of Prisons and Parole and Probation. Those departments had a common set of data they could exchange. It was agreed the attorney general should participate in the Business Process Re-engineering (BPR) for Public Safety, which was the only change in the document. When Senator O'Donnell asked if the board voted on the change described by Ms. Kavanau, Ms. Kavanau replied no. Chairman Tiffany pointed out the chief of Planning and Research had been removed from the base budget. Ms. Kavanau stated it was the assumption of DIS they could manage with two chiefs. Senator O'Donnell asked if $1 million per year was paid by the Department of Motor Vehicles (DMV) and Public Safety to DIS. Ms. Case replied it was close to $1 million per year for utilization and mainframe services. The DMV side of the Department of Motor Vehicles and Public safety was on the state's mainframe computer. Senator O'Donnell inquired if $1 million per year was a fair and equitable charge for data storage on the state's mainframe computer system. Ms. Case stated the utilization of the mainframe was based on rates for different cost centers and was uniform and consistent with what all customers were charged. Senator O'Donnell concluded if DMV and Public Safety had their own data center, there would be no loss to DIS. Ms. Case responded it would be no loss to DIS, but it would increase rates for other customers to make up the expense. She pointed out other data centers, like SIIS, were not stand-alone systems, but still utilized the state's mainframe. When Senator O'Donnell asked if the Gaming Control Board and the university system utilized the state's mainframe, Ms. Case replied they were completely autonomous. Senator O'Donnell inquired if there were other agencies besides SIIS which used the state's mainframe. Ms. Case answered the Controller's Office, DMV, Public Safety, SIIS, and DOT all used the state's mainframe. Ms. Kavanau explained to establish a new data center in a new agency, the cost would far exceed what the agency paid previously. Senator Jacobsen requested a chart depicting the agencies, their locations and for whom the agency was responsible. Chairman Tiffany asked if there were further questions regarding the Research & Planning Division. There being none, Chairman Tiffany closed the hearing on budget account 1370 and opened the hearing on budget account 1365. INFORMATION SERVICES - SYSTEMS & PROGRAMMING DIVISION - PAGE 621 Chairman Tiffany requested a contrast between NOMADS starting up with 29 programmers whereas Rhode Island had 21 programmers. She also inquired if only one or two of the five applications were implemented, what would the total support staff be. Ms. Kavanau explained the NOMADS system being developed in Nevada was a much more complicated system incorporating a number of modules which the Rhode Island system did not include. Ms. Case stated DIS had attempted to develop estimates based on comparisons with many states. The Nevada system only entailed approximately 20% to 30% of the Rhode Island system, and that portion of Nevada's system had changed and had grown in complexity and size. The Idaho system was similar in operation and platform to the Nevada system and had a total staff of 60. The system in Nevada would be approached with significantly less staff, and in the subsequent biennium a request for additional staff could be made, particularly as parts of the system were added over the biennium. Chairman Tiffany inquired if all 60 staff in Idaho were programmers. Ms. Case stated she had a breakdown of the Idaho staff and would provide it to Mr. Burke. Chairman Tiffany commented she would like the best estimate possible of staff required for the system. She asked if DIS would be able to fill the 12 requested positions with qualified technical people in the necessary time frame. Ms. Kavanau replied the department could begin the recruitment process before the positions were approved as long as the job announcement and the interviewing process included the statement that the positions were contingent on legislative approval. This would allow a three- month head start to the July date when the positions would become available. Chairman Tiffany inquired if the possibility was built into the formula that perhaps only three positions could be filled in the first quarter and three in the second quarter. Ms. Kavanau responded no. The request was for 14 new positions in the first fiscal year because the workload was there for them to do and an additional four for the following fiscal year. Chairman Tiffany inquired what the department would do if the positions were not filled. Ms. Kavanau indicated Sierra Pacific had laid off a number of information technology people, and it was hoped some of those people could be hired. Chairman Tiffany asked again what would happen if the positions were not filled. Ms. Kavanau explained the department would work through personnel. In the prior three months people from out of state who were interested in moving to Nevada had called DIS seeking information on employment. When Chairman Tiffany inquired if funding had been set aside in the budget for bringing in people from out of state for interviews or for relocation, Ms. Kavanau responded no. Chairman Tiffany asked if funding for interviews or relocations would become an issue which needed to be addressed. Ms. Kavanau indicated state law made allowances for that situation, but the department would avoid it if possible. If an applicant did not want to come for an interview unless the state paid, DIS could go to IFC to seek permission for the funding. Chairman Tiffany asked if salary was an issue in the attempt to hire qualified people. Ms. Kavanau responded an occupational study would help to find qualified people. Chairman Tiffany requested an update on the NOMADS project. Ms. Case indicated NOMADS was a horrendous project and continued to be a challenge, particularly at the data center where there were in excess of 200 programmers developing the system. There was a great deal of activity on the part of Integrated Systems Solution Corporation (ISSC) and the subcontractor, and they did deliver phase I code. A demonstration on user acceptance testing was given, and there was positive feedback from DIS staff as well as welfare staff. ISSC volunteered six of their staff to accompany DIS staff to Las Vegas for the demonstration. There was a deadline, and 300 people were working 24 hours a day to meet it. Chairman Tiffany asked if the problems brought up during the last IFC meeting had been solved. Ms. Case did not believe the problems had been solved, and welfare would be reporting on the issues during subcommittee hearings. Ms. Kavanau expressed reluctance to discuss missed deadlines. If a state were to openly admit it was not going to meet a federal deadline, the federal government could impose financial sanctions based upon the state's admission. Ms. Giunchigliani noted the budget had reduced positions with the Departments of Education, Tax and Conservation from four to three. She inquired if the reduction was because the position for aging was being deleted. Ms. Kavanau stated the position for aging was in error. Ms. Giunchigliani asked if the NOMADS system had the ability to electronically scan items for welfare recipients. Ms. Kavanau indicated the former project manager of NOMADS was told by the federal government to discourage the use of electronic benefits transfer (EBT) because of the expense. However, the NOMADS system could be upgraded to support EBT if the legislature wanted to pay for it. Ms. Giunchigliani asked what a programmer did. Ms. Case explained NOMADS had in excess of 250 programmers who essentially wrote several millions of lines of code. Ms. Giunchigliani inquired if DIS had looked at working with community colleges to encourage people to become programmers. She also asked the rationale for funding 29 programmers in addition to funding MSA $1 million for programming. Ms. Case responded 11 of the 29 programmers existed and did nothing but support the welfare systems. Changes which came in almost daily from the federal government required continual updating by the programmers. The Master Services Agreement allowed DIS to acquire temporary resources to deal with serious federal mandate changes or to help an agency meet a deadline. Ms. Giunchigliani queried the amount of time MSA would be used. Ms. Kavanau replied the time could involve anywhere from two days to several months. Ms. Giunchigliani asked how contract positions could be filled if DIS was having difficulty filling the technical positions. Ms. Kavanau explained DIS would let a Request For Proposal (RFP) statewide for a variety of services which may be needed over the subsequent biennium. Instead of picking one successful vendor, DIS would choose three to provide backup. Ms. Giunchigliani asked if an individual could not be approached because of the PERS requirements. Ms. Kavanau replied an individual could apply through the competitive bid process. Ms. Case indicated DIS had repeatedly tried to take advantage of all types of services but without success. Education institutions did not offer the training DIS required for the positions which needed to be filled. Chairman Tiffany suggested measurement indicators be put together to measure the usage of the Master Services Contract. Senator O'Donnell asked if a deliverable on NOMADS was to have occurred on March 2, 1995. Ms. Case responded phase I code was delivered on March 1, 1995. When Senator O'Donnell inquired if the delivery went well, Ms. Case replied yes. Senator O'Donnell queried if the NOMADS system was taxing the 200 programmers and staff of DIS. Ms. Case indicated there were between 250 and 300 programmers, and their activity was probably ten times more in terms of development activity than the state had ever seen with all agencies combined. Senator O'Donnell inquired if there would be a problem with the ACES system and the NOMADS system coming on line at the same time on the same mainframe. Ms. Case indicated the ACES system would come on line before the NOMADS system, and the appropriate upgrades had been requested to handle all the growth for the DIS customer base. Senator O'Donnell asked if ACES would be installed in April. Ms. Kavanau explained the ACES project was a fixed-fee project which had gone two months beyond the original estimate for completion. The delay would not cost the state any money because the contractor could not leave until the state was fully satisfied with the product. The new estimate for completion was between April 15 and May 15. Senator O'Donnell asked what the contract amount was with Mr. Dunn. Ms. Kavanau commented she did not have the contract with her, but the contract was based on an hourly rate through Prodata. Ms. Giunchigliani stated the contract with Mr. Dunn appeared to be as an independent contractor for $50 per hour up to $50,000 and was switched to Prodata at some point. Ms. Case stated DIS did try to hire Mr. Dunn as an independent contractor. PERS informed Mr. Dunn he could not contract with DIS. The contract was terminated, he went to work for Prodata, and DIS hired him through Prodata. Ms. Giunchigliani commented $12,000 was paid directly to Mr. Dunn as an independent contractor prior to his going to Prodata. Ms. Case agreed. Ms. Giunchigliani emphasized that was the part that was missing from the testimony. She stressed she wanted to see the documentation from PERS regarding independent contractors. Mr. Allard inquired how the $12,000 payment affected Mr. Dunn's retirement. Ms. Case said it was her understanding there was a $15,000 limit. Chairman Tiffany inquired where the seven programmers who were being transferred from outside of DIS would be physically located and what their hours would be. Ms. Kavanau commented in the past the state lacked professional management of all its information technology and information systems people. As an analogy, she explained the Department of Transportation would be used to build a highway, Buildings and Grounds would be used to build a wall, and DMV would provide information on safe driving. The same rules applied to information technology. But what happened typically was an agency bought some PC's. If someone in an agency spent at least 50% of their time working with a PC, they were reclassified, and the agency then had an unprofessional professional information systems person. The recommendation to consolidate personnel was based on professional leadership in technology, the type of data handled, and physical location, which had caused some grief in trying to explain what had been done. Although SPIRIT promoted the idea of consolidating all information technology professionals into DIS, it would be unreasonable and impractical to do so at this time because DIS did not have, nor was it projected to have any time soon, a presence outside of Carson City. The alternative would be to consolidate those professionals in Carson City and come back in two years with a complete plan on the consolidation. Mr. Allard inquired if DIS had heard from agencies regarding their fears of disenfranchisement from DIS to the point they would not have input into their own data system. Ms. Kavanau commented she had heard some of those fears. Even though DIS had distributed almost 500 copies of SPIRIT, sent out tapes, spoken with every agency administrator and constitutional officer, showed them stacks of documentation, and sent out memos, the information was not yet filtering down. There was nothing to fear. DIS could not possibly dictate to a user what information they needed. A great number of checks and balances had been established, along with a great deal of documentation, and the joint application development theories had been employed in the department, but the people expressing concerns had not been exposed to these things and probably did not understand what they meant. Mr. Allard commented he had also heard testimony that if an agency did not have to pay DIS $1 million a year, it could put together an information system which would be better than that of DIS, would be closer to home and would be more user friendly. Ms. Kavanau agreed that the closer technology was to the user, the happier the user would be. The mistake was technology solutions were not being developed by professionals from an enterprise-wide solution. Ms. Kavanau quoted from a report written about California as follows: "The major problems are a lack of centralized effective leadership to chart and guide the state's course for growing reliance on information technology. There is no statewide plan or standards that apply to each agency. There is a lack of statewide oversight. There is a redundancy of data maintained throughout in separate computer systems. Costly data base management systems proliferate and are replicated over and over again. Noncompatible computing systems continue to proliferate. There is a lack of statewide coordination. There is no centralized effective coordination of the state's many information technology activities. The proliferation of separately maintained computer networks continues. There is inadequate coordination of the activities of major data centers. The effective use of information technology is not as high as it could be." Even though the report was written about California, it applied to the majority of state government. Mr. Allard wondered if the state needed to go from a patched-up system to a massive data center which controlled everything. Senator O'Donnell agreed with Ms. Kavanau's description of how PC users become data processing managers. He pointed out in private industry people who wanted a data processing solution would investigate their options, make a decision on the solution, and take the heat if the decision they made did not work out. Agencies wanted the same thing. They wanted to know the options; they did not want controls or enterprise zones. If agency decisions did not work out or were inefficient, they would take the heat from the legislature and the administrative branch. The controller was supposed to be in control of accounting. Why would DIS develop the accounting package? How could DIS disapprove DMV's work program? Ms. Kavanau called attention to two laws. One law stated the purpose of DIS was, "To prevent the unnecessary proliferation of personnel and equipment in state agencies." Another law stated, "DIS is accountable for the cost efficient deployment and utilization of technology in the Executive Branch." The controller established his own system many years ago because he needed to have an accounting system, and he perceived the laws to require him to have his own system. Senator O'Donnell asked if Ms. Kavanau disagreed with the controller's perception of the law. Ms. Kavanau replied she had never seen the law the controller quoted. DIS was also charged with setting standards. Because of increased demand for data sharing and public access, the most cost effective way of sharing resources needed to be found. When Senator O'Donnell requested the NRS statute number regarding the unnecessary proliferation of personnel and equipment in state agencies, Ms. Case responded NRS 242. She added since 1988 the legislature and its staff had criticized DIS for not carrying out its responsibilities for statewide oversight. The auditors made a number of recommendations in the 1988 audit. In 1991 there was a privatization committee established, and in 1993 there was SCR 5. It was Ms. Case' belief that the agency had followed the intent of the legislature. If the legislature wished to change the direction of DIS and did not want statewide oversight and wanted to grant every agency the freedom to do as they wished, that would be the legislature's choice. DIS was simply trying to follow legislative direction. Senator O'Donnell stated he felt it was the intent of the legislature for DIS to provide assistance. He did not feel it was appropriate for DIS to dictate to a department head or a constitutional officer what the agency should do. Ms. Kavanau pointed out the 1988 audit criticized DIS for not doing the very things Senator O'Donnell was addressing. If the problems of duplication, fragmentation and dissimilar systems not being able to communicate were not important, then DIS needed to step back. But the intent of SCR 5 was to consolidate wherever possible. Chairman Tiffany commented not all people agreed consolidation was a problem. SPIRIT was an organic document, and there would be more technology in the future. The first part of the consolidation with the seven programmers and four microcomputer specialists might be considered a pilot program. But Chairman Tiffany emphasized she was not interested in adding 12,000 square feet of office space to house all the people as a result of the consolidation. It made sense to have technology close to the people using it. She remarked she would be looking for something in between. Mr. Price pointed out he was not happy with the scenario regarding Mr. Dunn. PERS set a limit on how much a former employee could earn from the state, and Mr. Dunn met that limit after making $50 an hour doing what he had been doing for the state at $15 an hour. People should be reminded they were presumed to be under oath when testifying before legislative committees, and it was a felony to knowingly lie before a committee. Mr. Price said he would raise the issue with the chairmen of possibly subpoenaing the involved parties to find out what happened in the case of Mr. Dunn. He thought the loophole had been closed after the Department of Transportation fiasco, but there may be some other language needed regarding employment of former employees of the state. Ms. Kavanau assured the committee at no time did anyone with the Department of Information Services give any testimony with the intent of not telling the truth. Chairman Tiffany asked if there were further questions regarding the Systems & Programming Division. There being none, Chairman Tiffany closed the hearing on budget account 1365 and opened the hearing on budget account 1385. INFORMATION SERVICES - FACILITY MANAGEMENT DIVISION - PAGE 631 Chairman Tiffany requested a description of the benefit of consolidating the functions of the Telecommunications Division and Communications Division. Ms. Kavanau indicated DIS was recommending the consolidation of the Telecommunications Division, Communications Division and Facility Management Division. The Telecommunications Division provided voice communication services; the Communications Division provided microwave services; and the Facility Management Division provided data communication services. The divisions provided communication of information. When a customer had an information need, DIS looked at all three divisions to meet those needs. The customer's inquiry was responded to as a single unit, and it was not necessary to have separate divisions. The intent would be to have a single division representing the various mediums of communication of information. Chairman Tiffany asked if this setup would provide more efficiency and greater cost savings. Ms. Case responded ultimately there would be cost savings, but the biggest benefit would be better customer service. An attempt would be made to build teams with expertise and cross training as the technologies merged. Chairman Tiffany requested information on the mainframe and computer system upgrade. Ms. Case explained DIS was projecting to upgrade the ES 9000 to a model 821. As DIS bought a CPU or major upgrades, they tried to project the capacity needed for a four- to five-year period. The purpose was to finance major upgrades through the period they would be used and would be paid off before beginning with another upgrade. During incremental steps requests would be made for more memory and other items. Brian Burke was provided with utilization statistics for capacity planning as well as the projected customer growth and projects such as NOMADS and ACES. An attempt was made to stabilize rates while increasing the capacity for the customers. Chairman Tiffany inquired how the upgrade was being performed. Ms. Case explained another rack, or engine, would be added to the ES 9000, which would provide additional processing power to the CPU. The upgrade would also allow DIS to move into parallel processing. Chairman Tiffany inquired if adding chips to the ES 9000 was the most cost effective method to upgrade. Ms. Case stated she felt it was the most effective way to upgrade. She explained DIS was paying off the ES 9000 while providing model upgrades, and the upgrades would be paid off before the parallel processor would be added. Chairman Tiffany commented she did not believe in total consolidation on a mainframe. She asked what criteria would be used to determine who would be on the mainframe and who would be on a server with workstations. Ms. Case agreed that not all customers should be on a mainframe. SPIRIT recommended a balance between all platforms. The criteria includes, one, what would be the most cost effective solution for the customer; and, two, who would need the data based on the groups of agencies that accessed the data. Ms. Kavanau remarked DIS was not suggesting the creation of a super data center. The request was to look at consolidation of data centers. Three to four agencies were selected which DIS felt could be consolidated in the most cost effective manner. It was also recommended some customers be removed from the mainframe and placed with another data center. Mr. Allard inquired if the proposal to convert the state's radio system to an 800 MHZ system had been withdrawn. Ms. Kavanau explained in 1993 the legislature requested DIS to investigate the viability of 800 MHZ for state government. One of the agencies of the Executive Branch had already started deploying the 800 MHZ by that time. A study of the 800 MHZ viability as a result of SCR 5 had not been completed because of the amount of research required, but there were compelling reasons to look at 800 MHZ. Chairman Tiffany asked if funding for changes in software was included in the budget. Ms. Kavanau presumed all funding had been included in the budget. The increase in the cost to maintain the software on the upgrade was included in the budget. However, a one-time charge as a result of the upgrade was not anticipated. DIS was in negotiation with individual software manufacturers to reduce the expenses as a result of the upgrade. Chairman Tiffany asked how much could be anticipated in expense reduction. Ms. Case stated it was hard to tell. Threats were made with one vendor that the state would go with other vendors because of the cost increases, and a five-year contract was signed with the vendor that the state would not be assessed these increases. Ms. Case requested DIS be given authority for the budget increase in the event it would be needed, but they would continue to negotiate for a lower price with the software vendors. She preferred not to mention the vendors' names as that might hamper the negotiations. Senator Mathews expressed concern about not mentioning the names of vendors, as this was a public hearing where public information was being discussed. Ms. Kavanau indicated the information would destroy DIS' ability to negotiate. The information had been provided to legislative staff, but Ms. Kavanau said it would be provided publicly if requested. Senator Mathews reiterated her concern that the hearing was an open meeting to which the open meeting laws applied and all information should be made public. Chairman Tiffany asked if the final negotiated numbers for the budget would be provided by the time the budget was closed. Ms. Kavanau said she would do the best she could to provide the numbers by the budget closing. Chairman Tiffany inquired if there was a possibility the mainframe upgrade would cost $2.5 million instead of $3 million. Ms. Kavanau explained $3 million was the suggested retail price of the model upgrade at the time the budget was put together. She felt there could be a reduction in price because as technology gets older, the price goes down. However, she was reluctant to request less funding in case the price decrease did not materialize. Chairman Tiffany noted the transfer of positions from DMV and DOT along with their salaries, and asked what the billable hours would be. Mr. Lawson explained other agencies had an amount built in the budget for the cost of positions being transferred, but the transfers in question did not include that figure. The information had been provided to the Budget Division, and an amendment to the budget was being considered. The proposal would be to not bill the positions back on a billable hour basis, but to bill directly back for the costs. There would be no profit and no overhead built into the budget to cover management. Mr. Manning indicated discussions had been held with staff from DOT and DMV regarding the need to amend their budget accounts to properly account for the transfer costs. Chairman Tiffany asked if there were further questions regarding the Facility Management Division. There being none, Chairman Tiffany closed the hearing on budget account 1385 and opened the hearing on budget account 1355. INFORMATION SERVICES - TELECOMMUNICATIONS DIVISION - PAGE 641 Chairman Tiffany requested an explanation of the increased costs for the Watts line and the toll line. Ms. Kavanau explained the cost was derived from the increased demand for service, particularly from FY 1992 to FY 1994. Mr. Lawson stated part of the increase was attributable to access being provided to agencies in rural communities. Another factor was increased use of credit cards by employees. The centralization of service had provided access to more people, not an actual increase in costs. Chairman Tiffany requested the justification for the new communications specialist. Ms. Case stated the position was requested because of overtime, inability to respond quickly, and the need to set standards and policies statewide within the voice industry. Chairman Tiffany asked if there were further questions regarding the Telecommunications Division. There being none, Chairman Tiffany closed the hearing on budget account 1355 and opened the hearing on budget account 4555. INFORMATION SERVICES - COMMUNICATIONS DIVISION - PAGE 647 Chairman Tiffany commented it appeared user fees were not built into the budget. She requested the Budget Division to provide information on the user fees. Mr. Manning said he did not have the information available and would provide it to staff. Chairman Tiffany requested information regarding the $150,000 contract to study the microwave system. Ms. Kavanau explained the state had an extensive microwave network, and there was controversy regarding the elimination of those pieces of equipment which could be provided by private sector. Staff in the Communications Division was biased toward retaining the equipment. Therefore, in order to insure objectivity, DIS wanted to go through the competitive bid process and analyze the information in order to make a recommendation on the microwave network. Chairman Tiffany asked when the study would be done. Ms. Kavanau stated the study would be between the first two fiscal years. When Chairman Tiffany inquired if a user fee was necessary and was included in the budget, Ms. Kavanau responded affirmatively. Chairman Tiffany asked if Ms. Kavanau had confidence in the way the study was structured. Ms. Kavanau explained in 1991 DOT let an RFP to select a vendor and then constructed an 800 MHZ backbone system in Las Vegas. The Department of Motor Vehicles and Public Safety and other agencies also indicated an interest in converting to 800 MHZ. The funding requested for the microwave study included 800 MHZ with the anticipation of precluding the same problems of duplication with the 800 MHZ issue as happened with computers. Chairman Tiffany asked why the Budget Division director put off the 800 MHZ decision. Ms. Kavanau indicated as a result of a meeting with DMV, the Budget Division director, DOT and other interested people prior to the time the Executive Budget was completed, it was her understanding 800 MHZ funding would be recommended for the Nevada Highway Patrol and the Department of Motor Vehicles and Public Safety. The funding did not appear in the Executive Budget, and Ms. Kavanau stated she did not know why. Mr. Allard inquired if it was not possible to have different vendors in the northern and southern parts of the state for the 800 MHZ system. Ms. Case explained a computerized system, or repeaters, managed all of the radios on the 800 MHZ network, which presented a compatibility issue. Mr. Allard pointed out the systems would not need to be interchangeable if there was one system in the north and one system in the south because the distance would preclude communication between the two systems. Ms. Case stated there was a possibility the system could operate statewide, and that was the reason for the study. Chairman Tiffany requested a list of the proposed Business Process Re-engineering studies. She asked which agencies were in the process of the BPR. Ms. Kavanau provided the requested list (Exhibit D) and explained DMV had completed the first phase, or business case, of the BPR. Integrated Financial Systems had completed the first phase and was moving into the requirements definition. Because of a change in administration at DOT, DIS was not sure of their plans. Child and Family Services was in the BPR process to prepare for the new systems required for the federal government. Chairman Tiffany asked what were the agencies' involvement and DIS' involvement with the BPR, and did the Governor include the agencies in the budget. Ms. Kavanau indicated DIS looked at each agency to gain information on how best to automate tasks being performed. Recommendations were made based on the size of the agency, the fragmentation perceived when the agency was interviewed through the SCR 5 studies and the need for public response. Exhibit D was prioritized according to the most critical issues. DIS represented technology and expertise in technology. The people actually conducting the BPR as recommended in the Governor's budget were consultants. The consultants had experience from other environments and were objective. When Mr. Allard asked if the consultants would make recommendations in regards to SPIRIT, Ms. Kavanau responded no. Chairman Tiffany commented if problems were not identified, adding automation would only add to the problems. Ms. Kavanau stated BPR was a management tool, but the time factor was adding to the problem. The need to respond to a federal mandate for automation removed the opportunity to take a good look at the process. BPR enhanced management and documented what the needs were. Ms. Giunchigliani referred to Exhibit D and inquired why AB 153 was rated 1 versus DMV or Human Resources. Ms. Kavanau indicated the rating was the result of the significant impact agencies had on businesses and citizens of the state based on the amount of licensing and collection of taxes. The only way to get into the complex issues was through a BPR. Ms. Giunchigliani suggested DMV be put ahead of Human Resources until NOMADS was up and running to see if the program eased or complicated the problems. She requested the list of priorities (Exhibit D) be reworked. Chairman Tiffany asked what one priority was the most important for the biennium. Ms. Case stated all the agencies were important, and Human Resources was put before DMV as a judgment call because of significant federal issues and welfare reform. The list was a recommendation only. The decision would need to be made by the legislature, which was obviously going to be a tough decision. Ms. Giunchigliani suggested the joint subcommittee could look at whether the effects of the BPR might inhibit some of the opportunities of Human Resources. She stated she did not have a problem with the agencies listed as 1A in Exhibit D because there was a potential of receiving federal funds and highway funds so the impact on the general fund would not be as great. Chairman Tiffany requested an update of Exhibit D listing those agencies it was imperative to deal with during the 1995-97 biennium. Ms. Giunchigliani stated the legislature was rushing through the budgets and was not getting into policy decisions. She added the legislature needed to deal with policy issues separately from budget issues. Chairman Tiffany called for further testimony regarding the Communications Division. There being none, Chairman Tiffany adjourned the hearing at 11:00 a.m. Respectfully submitted: _________________________________ _ Jonnie Sue Hansen Committee Secretary Joint Subcommittee on General Government Assembly Committee on Ways and Means and Senate Committee on Finance March 8, 1995 Page