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CHAPTER 3

Requirements

• Determine needs ? • Use restrictive specifications when only one item or feature will do the job ? • Consider factors other than price.?

The economy and effectiveness of the Government's acquisition system depends not only on how well it serves the Government at large but also on how well it supports the individual user. This chapter focuses on such user concerns as defining and communicating needs, responsiveness, Government specifications, and product quality.

Communicating Needs

Effective acquisition requires the clearest possible communication between the user and the local representative of the Government's acquisition system. From the outset, it is essential that the full context of the user's need be clearly understood. The absence of such understanding often increases the total cost of procurement and inhibits the ability of the user to perform effectively.

The basic purpose of the procurement system is to provide the user with required goods, services, and facilities in the most efficient and economical way possible, yet the system sometimes makes it difficult for the user to satisfy his needs. The procurement system may impose mandatory sources of supply and specifications, directed procurement methods, and other restrictive procedures. Exceptions require' extensive documentation; however, nothing in the system prevents a user from ultimately obtaining what is needed to accomplish an authorized mission. Decisions of the Comptroller General have repeatedly upheld the right of Federal agencies to:

The cost of and time spent on communicating a description of needs must be considered in the evaluation of any procurement system. The failure to communicate needs effectively causes serious problems, including a significant increase in the total cost of procurement.

Procurement offices not co-located with the user normally require formal procedures for the communication of requirements. In theory, these formal procedures define the need precisely and result in procurement of the required goods. However, in practice:

• Costs tend to increase the farther away the procuring office is from the using activity. • Any acquisition system that relies on formal specifications will trail the development of commercial products. • As paperwork proceeds up the organizational structure, many levels review and may "improve or simplify” the users' requirements. This often results in delivery of a product that differs from that required. The most common complaint in this area concerns substitution of brand-name items. Dissatisfaction with the substitute is sometimes so strong that it is returned in its original carton and never used. This usually means that the user is forced to find an alternative means for fulfilling the original need. • Formal statements of requirements tend to become cluttered with protective and explanatory clauses that do not provide an

* Decisions of the Acting Comptroller General, 17:554-560, Jan. 8, 1938.

? Letter from the U.S. Comptroller General, B-157053, to James F. Gardner, Aug. 2, 1965.

· Letter from the U.S. Comptroller General, B-169140, to the Secretary of the Navy, July 8, 1970.

10 not provide an adequate basis for intelligent bidding.

Many users are concerned because distant procurement staffs often fail to consider cost to the point of use (delivered or landed cost). Both costs and effectiveness can be affected by the user's location and the method of delivery, especially if the user must prepare the item for end use or actually deliver it to the point of use. For example:

• One using activity indicated that the rail siding to which plywood was shipped was more than ten miles away. This resulted in additional costs because the user had to obtain a truck and crew to unload and deliver the plywood to the point of use. • Users believe the freight costs exceed the cost of the item on many items shipped from distant depots. • Many users expressed the opinion that, if the total costs of central agency or interagency support were known, local commercial outlets for certain services or products would prove to be more cost-effective.

Users expressed concern that staff-level personnel often fail to consider the rising cost of labor for certain services, particularly in repair and maintenance activities. For example, labor cost is a major portion of the total cost of most paint jobs. Attempts to save on the cost of paint can result in more frequent repainting and less productivity. This relationship of labor to supplies generally applies to the entire field of maintenance.

Ordering simplicity is an important factor in satisfying user needs, particularly when the product does not carry a Federal Stock Number (FSN) or does not have a purchase description developed by design engineers. Most users know what they need and can easily communicate a requirement to a colleague but experience difficulty in describing it to the procurement community. These difficulties can be time-con

suming and costly, and failure to communicate fully can result in delays and inappropriate procurements.

Clear and direct communication with as few steps as possible saves time and money. Such communication places the user's need in perspective and oftentimes sharply reduces the time and money spent on processing the user's requisition.

When requisitioning and procurement routines are overly formal and rigid, the cost of a procurement, particularly a small purchase, can become excessive. For example: *

• Instead of purchasing a $17 identical replacement motor from a local vendor, a lower priced “equivalent" was purchased through competition. Replacement time for the “equivalent” was 2 1/2 hours whereas the exact replacement could have been installed in 15 minutes. When one considers today's labor costs for mechanics at $6 an hour, the extra cost becomes apparent. • The supply personnel in a major using activity were frustrated in their attempts to identify nonstock-listed items or items for which stock numbers were not identified.

Another example involved an automotive maintenance shop. The unbelievable sequence of steps used in purchasing repair parts was as follows:

• Because he was unaware of certain part numbers and prices required to fill out requisition sheets, the automotive shop stockman called a local Ford agency to get this information. • The purchase request was prepared from the handwritten requisition and sent to the local purchasing office. • The purchase request went to a small purchase buyer who called three Ford agencies to get competitive quotes. • The small purchase buyer advised the lowest offeror of the award and dictated a memorandum of the order. • The supplier delivered the items to the automotive repair shop.

These formal procedures also caused excessive prices to be paid for parts. Although the

• Study Group 13A (Commercial Products), Final Report, Feb. 1972, vol. I, p. 179.

system ultimately met the user's need, competition characteristic of the automotive parts market was not sought; procurement was restricted to the original equipment manufacturer whose part numbers were identified to the buyer.

Ideally, the simplest form of ordering lies in having the customer tell the supplier what he needs. Each additional step in the process increases the total cost of the procurement. The functional support contract is a good example of a technique used to simplify communication between user and supplier. This form of contract is tailored to provide all parts or materials needed by a using activity to perform a function (such as maintenance of a vehicle fleet). With all items prepriced by product line, contractual arrangements can be made for users to communicate requirements directly to the supplier. With a sufficient volume of business, the contract can provide for the supplier to have an on-site outlet at the point of Government use. A more detailed discussion of this procurement technique is outlined in Chapters 4 and 6.

• Prompt delivery is crucial to a work schedule when a series of items is needed to complete an order for maintenance, construction, overhaul, or other requirements.

Procurement procedures can accommodate urgent needs. “Public exigency” justifies immediate procurement by negotiated contract. Direct contact between user and supplier and the “handcarrying" of emergency requests are exceptions to normal procedures. Priorities can be used to speed the process or provide additional specialized manpower. Each exception increases the cost of procurement. Procedures that minimize or eliminate the need for exceptions should be developed.

In an economic environment that places a premium on labor, any supply system that fails to consider the cost of idle personnel and equipment caused by late or unresponsive delivery cannot be cost-effective. In this sense, responsiveness must be measured from the time the need for a specific item is determined until the item is delivered. Systems that measure effectiveness by the time it takes for a depot to fill a need from receipt of a requisition until the item is shipped are misleading and are lacking in total cost visibility. Personnel costs are significant and are often much higher than the premium that must be paid for rapid delivery of a needed product.

Timeliness of Delivery

User Satisfaction

The total cost of satisfying user requirements is directly affected by elapsed time for delivery. More importantly, promptness may be crucial to accomplishment of the user's mission. Although optimum responsiveness would provide the user the material when he needs it, the system does not always work that way: users take deliveries when they can get them.

The importance of promptness can be illustrated by a few examples:

• Quick delivery response for maintenance parts has a cost premium since equipment is not usable when in need of repair. (The high downtime cost of automotive fleets is an example of this problem.) • Parts for critical equipment are often stocked for insurance because the cost of breakdown is so high that immediate responsiveness is justified. (Air compressors for air conditioning systems used in ADPE processing areas.)

Government acquisition systems are designed to meet user needs balanced against such factors as agency resources, mandatory sources, and social and economic programs. A user's satisfaction is directly proportional to the extent he feels his ideas and problems are acted on by those on whom he must depend for support.

Recommendation 2. Provide a positive means for users to communicate satisfaction with their support system as a method of evaluating its effectiveness and ensuring user confidence.

The effectiveness of a highly automated centralized supply support system should be judged by those whose needs the system serves.

In the absence of such judgments, it is possible to lose sight of the purpose for having the system. Our studies revealed that support systems should be continually reevaluated in the light of how well the system serves the user.

Many users feel their ideas are ignored due to the lack of any uniform, effective procedure for receiving and responding to their suggestions and, more importantly, that there is little interest in such factors as ordering simplicity, delivery responsiveness, effective communication, and total cost to the Government.

Conclusions

The organizational structure of many activities makes timely decisions difficult and, therefore, costly and unsatisfactory. To make a system responsive to user needs, decisionmaking authority must be delegated to the lowest feasible level.

Generally, systems designed to provide specific functional support are effective. Systems that subordinate the user's needs to overly rigid requirements have few satisfied users. Agency or interagency systems are not benefiting from the lowest price for items if total costs are ignored.

Recommendation 4. Assign responsibility for policy regarding the development and coordination of Federal specifications to the Office of Federal Procurement Policy.

Definitions of the terms “specifications" and "standards” are available from several sources. Those most frequently used are:

• Specifications describe essential technical requirements for materials, products, or services. They specify the minimum requirements for quality and construction of materials and equipment necessary for an acceptable product. • Standards have the collective purposes of providing standard data for reference in Federal specifications and identifying standard items for use in the Federal supply system.

To analyze the process of purchasing by specification, one must understand the nature of Government procurement. The Government buys products for which it is the only user and also buys products for which it is but one of many users.

Items for which the Government is the only user are normally highly sophisticated products for which there is no commercial market. This includes major weapon systems such as aircraft and warships, which have relatively long lifespans. Changes made to weapon systems during their use necessarily are shaped by Government needs rather than by forces of the commercial marketplace. The engineering data necessary to produce this sophisticated equipment must exist before it can be manufactured, and the cost of developing these data is charged to the contract under which the data are produced and delivered to the Government.

Commercial products are developed to meet the needs of many users rather than those of any single customer. These items are subject to the competitive forces of a free market with the costs of improvements being borne by the private developer and reflected in the price of his product to the extent competition will permit. Generally, commercial products are dynamic rather than static.

Under the Federal Property and Administrative Services Act of 1949, the General Serv

SPECIFICATIONS

Specifications and standards are used in contracts to describe the product form, fit, and function required to satisfy the needs of a user. For purposes of this discussion the term Federal specification encompasses Federal and Military specifications, standards, and handbooks unless otherwise noted.

Recommendation 3. Require that development of new Federal specifications for commercial-type products be limited to those that can be specifically justified, including the use of total cost-benefit criteria. All commercial product-type specifications should be reevaluated every five years. Purchase descriptions should be used when Federal specifications are not available.

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ices Administration (GSA) was given the responsibility:

... to establish and maintain such uniform Federal supply catalog system as may be appropriate to identify and classify personal property under the control of Federal agencies . . . and to prescribe . . . standard purchase specifications."

Pursuant to this authority, the system of Federal and Interim Federal Specifications and of Federal and Interim Federal Standards has been created by GSA. Additionally, DOD publishes Military Specifications, Limited Coordination Military Specifications, Military Standards, and Military Handbooks.

Typically, the development of a Federal specification for a commercial product begins with a company's commercial specification. The Government gleans desirable characteristics from the company specification and incorporates them into a proposed Federal specification. The proposed specification is circulated to other firms and eventually, after changes are made, a final specification is developed. This process is very costly, time-consuming, and often is poorly coordinated.

Problems of Age

Program Size

A review of Federal specifications showed that 118 are more than 21 years old and 24 are more than 31 years old. Apart from the inaccuracies in the 24 specifications, they are of marginal value because of their age. Although age alone is not a sufficient criterion for obsolescence, four of them deal with items used by patients in hospitals (for example, children's and women's nightgowns, men's nightshirts, pajama coats and trousers, and bathrobes). These specifications are outdated. The Veterans Administration's program of providing flameproof patient wear is progressing rapidly. Current use of disposable products makes the standards for diapers, written in June 1932, of little value. Table 3 shows the relative ages of Federal specifications. TABLE 3. AGING OF FEDERAL SPECIFICATIONS

AND STANDARDS

As of June 30, 1970 Age (years)

Number

Percent Less than 1

776 1 to 3

1,960

39 4-10

1,649 11-15

400 Over 16

250 Total

5,035

100 Source: Same as table 1.

15

The promulgation and use of specifications have proliferated so that by 1972 there were more than 36,000 in use. The breakdown by type is shown in table 1. TABLE 1. NUMBER OF SPECIFICATIONS

BY TYPE Federal and Interim Federal Specifications 4,661 Federal and Interim Federal Standards

212 Military Specifications

13,956 Limited Coordination Military Specifications 11,161 Military Standards

6,658 Military Handbooks

98 Source: Study Group 13A (Commercial Products), Final Report, Feb. 1972, vol. I, part 4, ch. 2.

When appropriate, industry standards are cited in Federal specifications. Table 2 shows more than 2,000 such standards.

U.S. General Services Administration, Standardization as a Basis for Procurement and Supply Management, a position paper presented to the Commission, Sept. 17, 1971.

U.S. Department of Defense, Index of Specifications and Standards, July 1, 1970.

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Problems of Referencing

Virtually all specifications cite requirements

? U.S. Congress, House, Committee on Government Operations, Report of Subcommittee No. 5 to the Select Committee on Small Business, 90th Cong., 2d sess., 1968.

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