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.

Timeliness of Delivery

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.)

• 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.

User Satisfaction

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.

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.

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

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.

Program Size

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

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

In the table, the reference documents on the first level are listed directly in Federal Specification W-L-00101G. The second-level documents are those listed in first-level Federal specifications and standards only. The "other" first-level document is American National Standard C78 Electric Lamps, which may be purchased for $82.60. The Federal specifications and standards would cost the supplier $47.65. The military documents are free if ordered directly from the depot. No attempt was made to price the other documents. It required more than three weeks for the Commission to find and obtain the first- and secondlevel Federal specification documents. From this experience it appears that complete identification of all documents referenced in most specifications is virtually impossible.

Of the 313 documents concerning light bulbs (table 4) that the Commission could find, most pertain to packaging, packing, and marking. On the average, a supplier generally must ask three offices for specification-type documents in order to be able to bid responsively. It is extremely difficult and very costly to maintain a current set of reference documents since many of the specifications also cite industry standards. Firms doing business with the Government regularly have complained of this problem. New companies, and those who bid on Government work infrequently, are not familiar with these requirements and therefore may be at a disadvantage.

Other Problems

In addition to the cited problems:

• Purchase of items under a Federal specification when comparable commercial products are available usually results in greater cost to the Government.

• Use of Federal specifications that prescribe specific designs may deny the Government the benefit of technological progress because the high cost of testing alternate designs discourages industry.

• Overly strict interpretation of specifications for commercial products forces producers out of Government work, thus reducing competition.

Since specifications establish a minimum quality level, the offering of a better quality is not encouraged.

Federal specifications have certain advantages. They advance the public interest by providing a basis for standardization, for establishing quality levels, and for competitive procurement.

Obviously, real savings through the use of specifications and standardization only occur if the resulting product meets the level of performance required by the user. Central procurement offices contend that specifications establish "optimum quality levels." This can also be defined as the minimum quality required for the average user or the minimum level that meets the needs of most users. Specifications and standards inherently involve some averaging or grading of user requirements in order to prevent proliferation of grades and types of products. They may require a regular producer to make special production runs solely to satisfy some detail of the specification. When applied to commercial items, specifications tend to become broad rather than specific. This leads to specifications that do not always recognize the specific need of the user.

If specifications are obsolete, many commercial products do not meet their requirements. This in effect limits competition, defeats the intent of the Government, and deprives it of the advantages of the technologically dynamic open market.

In attempting to satisfy the needs of the average user through standardization, a single

quality line is provided. Unfortunately, user needs do not average out. Some users have lower quality requirements than provided in the standard; others have stiffer quality requirements. The result is that all users with needs below the average are brought up to it, and those with needs above the average fill their requirements by exception.

The Federal supply catalog system very often lists products that have commercially available counterparts. Many of these counterparts meet or exceed Government specifications, but some do not. Usually the needs of civilian agencies can be met by available commercial products, whereas the needs of military agencies often cannot.

The military use millions of commercial items that are bought through use of agencyprepared purchase descriptions. The need for specifications and standards is not necessarily due to lack of commercially available products that will meet the Government's needs. Primarily, specifications and standards are used to provide a standard way of describing, cataloging, and qualifying products for purchase, stock, and issue.

Industry believes the Government should normally buy commercial products rather than items made to Federal specifications. Manufacturers state that Government contracts and specifications are not only unnecessarily complex but prevent users from buying satisfactory commercial products generally available in their area. Others state that reliance on Federal specifications results in a more expensive and slower method of procuring items that may be less cost-effective than their commercial counterparts.

Benefits to the Government in improved pricing, greater competition, and possibly better quality through the use of Federal specifications should be evaluated against costs and alternatives. Development and use costs should include costs of Government and industry coordination, additional inspection requirements, and updating of the specifications. Benefits should be evaluated on the basis of net savings through formal advertising and central procurement.

The elimination of duplication and obsolescence is the responsibility of the operating agencies that develop the specifications, but responsibility for policy and coordination of the overall standards and specifications program should be assigned to a central point of authority. The following actions could greatly reduce some of the problems:

• Development of Government standardization documents should be justified on the basis of all costs involved in their development, promulgation, maintenance, and use in relation to the benefits obtained.

• All standardization documents should be reviewed at fixed periods.

• Commercial product specifications, when used, should exclude packaging, packing, and marking requirements. All packaging, packing, and marking requirements should be reviewed for economy and efficiency in accordance with current commercial practices. • Packaging requirements for military items should be completely separated from all other standardization activities.

Conclusions

The Government standardization effort is a responsibility of several agencies. No single agency has total responsibility, and the degree of coordination among agencies is poor. Many specifications have become too complex for the need and inhibit or exclude the use of commercial products.

For example, see the Associated Equipment Distributors position report, Appendix B.

QUALITY ASSURANCE

To fulfill a user's need, commercial products must be of the required quality. The steps taken to assure quality always cost something and very often add enormously to the cost of procurement. Although quality assurance measures are sometimes inadequate, frequently they are overly elabcrate and unnecessarily expensive. To serve the user best and to minimize the total unit cost of procurement, both extremes must be avoided.