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Pages x and 216

Recommendation:

More resources should be devoted to the analysis of variances in labor, rates and efficiency; materials, prices, and usage; and overhead, volume and rates rather than the current effort of recording all costs incurred and then calculating an all-inclusive rate.

Response:

The implication of this recommendation is that current costs are recorded and rates established without the benefit of analysis. This is not so. Considerable analysis is performed on costs before rates are established. The use of printing cost investigating techniques are used in our control over cost variances. Although the report says we should do more, in our opinion, additional effort would take us to the point of diminishing

returns.

Pages x and 216

Recommendation:

Cost managers should become involved in the determination of standard rates and held strictly accountable for those costs under their control.

Response:

The recommendation implies that standard rates should be negotiated with managers for the purpose of controlling costs. Managers are involved in the development of rates. They are involved with determining workload requirements, staffing levels and work measurement criteria and data. However, standard rates would include other costs over which the managers would have no control. Furthermore, standard rates are a poor method of cost control. Analysis of cost variances by the printing cost investigating technique, budget analysis, and coordination with work measurement data, provides us with a superior cost control.

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More effort should be devoted to tracking and estimating delivery costs, sales volumes, fixed costs, reprint and unsaleable charges; incentives should be established to encourage manipulation/control of both segments of "profit" formula, i.e., revenues (prices and volumes) as well as costs; and certain staffing levels/costs should be tied directly to sales volumes.

Response:

The crux of this recommendation is not clear. As coupled with the leadin on page 216, it implies that if more accurate information were provided, estimates would not have to be made. This is not so. When establishing rates that are to be used in the future, estimates must still be used. Furthermore, there is no assurance that conditions will not change that will cause the estimates to be erroneous and have a material affect on results.

The specific manipulation of prices and costs implied by the recommendation is unclear. GPO is limited as to the extent of incentives that can be established to encourage manipulation/control over costs and revenues. Staffing and workload are considered in our budget process. Although various techniques are used to advise the public what publications are available, we are neither in a position to generate unlimited advertising nor free to establish various discounting and dumping techniques in competition with private publishers.

C. Billing Procedures

Pages xi and 217

Recommendation:

The policy and procedures for billing customers should be revised to base all bills on standard cost rates and factors. For jobs to be produced

in-house, prepare a firm billing estimate upon receipt of customer order:

Estimate to be based on production and material standards and schedules of prices/rates for all services including transportation.

Billing estimate to be furnished customer for use in fund administration and budgeting.

Billing estimate to be adjusted only for those changes made by customer after the job is placed in production, with advice of revised billing estimate to be furnished to customer.

Response:

Firm estimates are provided for many jobs produced in-house. This is especially true where it involves repetitive type work. For example, we have product scales, which are firm prices, for passports, postal cards, letterheads, and patents. Also, firm estimates can be given on other jobs whenever the circumstances warrant the extra work involved. For example, jobs that are subject to wide variation in cost would have to be calculated by a printing specialist. This would result in a very labor intensive process prior to the start of a job. Thus, the added workload would only be justified in cases where there is a danger of

exceeding appropriation authority or some other extenuating circumstance because the current procedure for this type of work is a more practical and simplified system. Currently, charges are compiled by the computer system as the job progresses through production, charges are collected by job and a preliminary bill is computer generated for subsequent review or adjustment. The adoption of the recommendation would bypass the present computer system on complicated jobs and lead to a more labor intensive process.

Pages xi and 218

Recommendation:

For jobs to be commercially procured, base firm billing estimate on the estimated or firm amount of the print order or other procurement document: Estimate to be based on net amount of the procurement (estimated or firm amount less discount) plus applicable surcharges.

Billing estimate to be furnished to customer for use in fund administration and budgeting, and to be adjusted only for changes made by customer after order is placed.

Response:

The recommendation to firm estimate commercially procured jobs appears to be on the premise that commercially procured jobs are all placed against firm price single bid contracts. This is not so on much of the work. A large portion of our contracts are termed "program" contracts. For this type of work, contractors bid on elements of various classes of work and when an actual order is placed with them, the individual job has to be computed. In addition, certain work requires visits to the contractors' plants for press inspections, the cost of which must then be charged against the job. Contract provisions usually allow a contractor to ship and be paid for a percentage deviation from the ordered quantity. Also, some contracts provide for the use of Government supplied paper, negatives, Government Bills of Lading; etc.; and in some cases when contractors fail to meet certain contract provisions, liquidated damages are assessed; all of which affect the billing to the ordering agency.

The billing by the contractor to GPO has to be audited, calculated, and certified before payment. To adopt the recommendation would have the effect of doubling our work by being required to calculate the job both before ordering it and after receiving the billing from the contractor. Furthermore, multiple billings with the corresponding increase in workload could result for those adjustments that are passed on to the ordering agency.

Pages xi and 218

Recommendation:

An alternative billing method should be provided for Congressional and other jobs for which work is received over time and for which production requirements cannot be ascertained at the point initial work is accepted. Billing estimate for such work to be incrementally determined, and to be based on production and material standards and schedules of prices/rates applicable for all work.

Response:

The recommendation is unclear but it is assumed that the "alternative billing method" refers to an alternative to firm billing estimates since the recommended method describes our present procedure of accumulating costs in the computer and making frequent billings on jobs for which work is received over a long period of time.

Pages xi and 218

Recommendation

Provision should be made for progress payment billing for those jobs for which completion will normally exceed a three-month period. Also customer billings should be generated from the Work-in-Process ADP system immediately upon completion of the job, to the maximum extent feasible, thereby bypassing the finished work stage.

Response:

In regard to progress billing, GPO presently does some billing in this manner. This is primarily limited to large dollar volume jobs which tie-up substantial sums of working capital since multiple billings increase our workload.

As we told the contractor, the direct billing from the Work-in-Process system was adopted during 1977 for limited types of work, but after a trial period was discontinued as the result of problems such as those described in our response to the recommendation that we firm bill commercially procured jobs.

Pages xi and 218

Recommendation:

The application of the Simplified Intra-Governmental Billing and
Collection (SIBAC) System should be extended to billings for the
Department of Defense services and agencies and for Superintendent
of Documents publications sales to governmental activities.

Response:

The recommendation implies that GPO did not attempt to extend SIBAC to all of its customer agencies and to Department of Defense (DOD) agencies. On the contrary, as we told the contractor, GPO initially attempted to extend SIBAC to all agencies. However, since DOD was exempt from the Department of Treasury SIBAC System, it was therefore exempt from the GPO system. We are still working toward covering all of our customer

agencies under the SIBAC System, including DOD.

The recommendation also states that GPO should extend the SIBAC System to Superintendent of Documents publications sold to Government activities. This is another example of the contractor making recommendations based on what we said we were doing, or planning to do, since we informed the contractor, that we are planning to extend SIBAC to the Superintendent of Documents activities.

Ꭰ . Surcharges

Pages xi and 219

Recommendation:

Surcharges should be reduced to reflect the costs they are designed to recover and other methods utilized to discourage the need for "rush" work.

Response:

We do, in fact, handle surcharges similar to what the contractor recommends elsewhere for our other rates, i.e., establish a standard rate and then hold that rate firm for an extended period of time. Sometimes we slightly over-recover and other times we under-recover costs.

We periodically review the surcharge rates so that appropriate adjustments can be made. These rates are established to recover the costs associated with priority work handled by GPO. Some of the costs associated with this priority processing is readily identifiable, while other costs are not. It would not be practical to design and implement a system that would collect throughout the entire GPO all of the additional costs including administrative costs -- applicable to priority work. However, we will continue to review our surcharge rates and adjust them on a more frequent basis than in the past, so as to minimize both over-recovery and underrecovery of these costs.

It should be emphasized that surcharges are not penalties to discourage rush work. They are designed only to recover additional costs. It would be improper for GPO to use surcharges or to utilize other methods to discourage work which is urgently needed.

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