CHAPTER 1

The procurement of commercial products involves all levels of the Federal Government and comprises the greatest arena of procurement interaction between the public and private sectors of the economy. The volume of day-to-day transactions, in and out of Government, affects the lives of nearly everyone in the United States.

For purposes of this study, commercial products include:

• Equipment, materials, supplies, parts, components, and accessories produced and sold to the general public directly or through an established commercial distribution system • Products generally equivalent to those offered to the general public but modified to meet Federal and military specifications

• Combinations of products having one or more elements that require special ordering but not special design or significant research and development

• Products or services of utilities, transportation systems, communications media, and other regulated industries serving the general public

• Products of Federally supported or operated industries, such as blind-made products and Federal Prison Industries, Inc.

• Services specifically related to the products outlined above, including maintenance, operation, lease, and housekeeping services.

Commercial products acquisition represents a major portion of the nearly $57.5 billion spent on Federal procurement during fiscal 1972. The magnitude of procurement of commercial products required a study approach that concentrated on the areas of greatest potential improvement. The basic purpose of acquiring

commercial products is to satisfy user needs. Therefore, the study was structured to sample user opinion in order to determine the current and potential effectiveness of the commercial product procurement and distribution system. Management opinion was also solicited in the field, at central supply activities, and at agency headquarters. In addition to visits made to Government and industry activities and an extensive review of prior studies and other available data, 12 public meetings were held to allow all interested parties to submit their views. The basic data and findings from this extensive study effort form the basis for this part.

The study findings reveal many opportunities for improvement. The conclusions and recommendations indicate the need for a shift in fundamental philosophy relative to commercial product procurement and for the establishment of a continuous oversight function to review agency policies and procedures. Part A deals with the oversight function and recommends the establishment of an Office of Federal Procurement Policy. The fundamental change in policy involves a shift to one of considering total economic cost or landed cost in reaching decisions concerning the procurement and distribution of commercial products. Under current procurement and supply policy, undue emphasis is placed on purchase price. This has resulted in inadequate consideration of administrative, distribution, and user costs in the total cost of providing a product or service.

The recommendations in this part provide the means for implementing the policy of basing decisions on a consideration of total economic cost. They include:

• Providing for appropriate consideration of