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or even fixes the equipment ultimately procured. This phase of the cycle was not analyzed in detail, but comments reviewed indicated that agencies generally lack ability to make feasibility studies without industry assistance and that the process generally is not completed in a timely manner. The quality of these studies varies widely, and adequate standard guidelines are not available.

• Existing Resources

OMB and GSA policies require agency review of Federal ADPE resources to determine if needs can be met by transfer or by interagency use of excess equipment or time. Agency reviews include:

Use of Excess ADPE Capacity. Federal Property Management Regulations require agencies to consider excess ADPE within the Government to meet their needs." The system is well covered by the FPMR and has been operating for several years with apparent success. We found no major criticisms of the present operation. Communications with GSA and other ADPE facilities are flexible and effective. If excess equipment is available, it is relatively easy to obtain and in less time than it would take to procure new equipment. GSA acts as a central clearing facility to assist all agencies.

ADP Services. The demands for ADP services are not uniform among agencies nor are they constant for an agency over a period of time. Some ADP tasks may be required only three months of the year. Others peak one or two times a year. In these cases, it may be more economical for the Government to acquire only the ADP service required and not obtain equipment to meet peak requirements.

ADPE Sharing. Many agencies share single computers or single systems with other agencies. The requirement for computational capability need not be filled by equipment within the user's organization. GSA has ADP sharing exchanges in each GSA region to serve as a clearinghouse for information on available excess time by type of equipment for all agencies. This review works quite well. It identifies and makes readily available

FPMR 101-82.801-8.

excess computer time, without using an elaborate reporting system. Sharing of existing equipment also provides a means of reducing agency purchase of capability that it only needs sporadically. The one limitation is that it only effectively identifies available hours and does not identify underutilization of machine processing capabilities.

• Specification Development

Specifications are developed when a determination is made to fill a need through a new acquisition. This phase is not only timeconsuming, but if not done well, its effects will extend throughout the acquisition process and later use of the equipment. By necessity, this effort must be performed by the user or with his close coordination. It also must be coordinated with procurement. Here again, industry has been relied on heavily for guidance in the absence of Government capability. It is during this time that capabilities of equipment are evaluated. The scope and method of evaluating proposed equipment are also determined in the preparation of specifications. Agencies, especially those with recurring requirements, are steadily improving their ability to master this phase of the process, but it is still fraught with inefficiency. It is also characterized by staff reviews and approvals at high levels, with inadequate attention paid to technical assistance. This phase is made more complicated by the need for submission of the requirement to an outside agency (GSA) for approval and possible delegation to the submitting agency for purchase. A further complication is the requirement to specify the telecommunications capability. Separate procedures have been developed to specify these factors, thus reducing the ability to merge both ADPE and communications costs on a common basis. Separate optimization of hardware and communications requirements can result in increased total system costs.

• Submission to GSA for Purchase or Delegation

Each procurement that is not automatically delegated to operating agencies, through use of Federal Property Management Regulations (FPMR), must be submitted to GSA.

The FPMR specifies the conditions and requirements for this submittal which include: applicable solicitation and amendments, data systems specifications, equipment performance requirements, attendant software requirements, and existing resource analysis. GSA will presume that all OMB policy and guidance directives including lease versus purchase decisions have been met. The agencies that have procuring capability request delegation in this submittal, but they are not certain that it will be granted since there is no standard GSA policy. GSA policy authorizes delegation automatically if a reply to the request is not made in 20 days. This time can be extended by GSA through requests for additional data. If GSA elects to make the purchase, the operating agency's technical personnel are made available for coordination and technical evaluation of proposed equipment. If the procurement action is delegated, the agencies then process the procurement in accordance with their procedures, subject to GSA qualifications.

• Procurement Action

Agency procedures vary considerably in the manner in which the procurement is accomplished. Most of the delegations are made to DOD activities that rely heavily on source selection procedures. The technical evaluation of proposals by Source Selection Boards includes an analysis of costs by various acquisition alternatives. This type of evaluation is essential to contract award, but the cost and time of using high-level boards and award directives in lieu of technical evaluation advisory boards on low dollar purchases lengthens the procurement process. • Technical Evaluation

During the selection process, reliance is often placed on live tests of the equipment. These tests include running a set of operations designed by the agency to measure performance, simulating performance with a predesigned set of programs, analysis through mathematical techniques, etc. There are no standards for the use of tests, and little cross-utilization of test data occurs between agencies. There are significant costs involved since each agency develops anew its own testing techniques.

Delegation Policies

Recommendation 12. Require that GSA establish ADPE procurement delegation policy that would promote (a) effective preplanning of requirements by agencies and (b) optimum use of manpower.

The legislative history of FPASA indicates that highly centralized procurement of all ADPE for Federal agencies was anticipated. This has not materialized and may never be feasible due to the scope of activity involved and the special treatment required for various agency applications. The coordinated procurement process which does exist is difficult to standardize for the same reasons. Where GSA does not procure ADPE, its policy is to delegate authority to agencies on a caseby-case basis. In deciding to delegate ADPE authority, GSA considers its own workload, the agency's existing capability, and the complexities of the proposed procurement.

Agencies with staffs that are proficient in the evaluation, selection, and procurement of ADPE complain that case-by-case delegation precludes orderly preplanning and optimum use of manpower and that administrative reviews lengthen acquisition schedules and increase costs. They believe a delegation policy that is less restrictive would shorten the acquisition cycle and reduce the total cost of acquisition.

Civilian agencies that have sporadic requirements for ADPE did not criticize specific delegation procedures, but some agencies that have a greater volume of procurement or ADPE procurement expertise were concerned about the complexity of the approval and delegation cycle.

Financing ADPE Acquisition

Recommendation 13. Revise funding policies regarding multi-year leasing contracts, in addition to use of the ADPE Fund, to permit Government agencies to procure ADPE on a cost-effective basis.

40 U.S.C. 759 (1970).

Meetings at the headquarters of the U.S. Department of Agriculture, May 24, 1971, and of the National Aeronautics and Space Administration, May 18, 1971.

GSA's ADPE Fund, with an initial capital investment of $10 million in 1967, has been augmented by the transfer of assets from the Federal Data Processing Centers. For fiscal 1970, GSA requested a $30 million increase in the Fund's capitalization. The same request was made for fiscal 1971. After GSA submitted examples of $18.1 million in savings involving two agencies, $20 million was authorized in the 1971 Supplemental Appropriation."

The main use of the ADPE Fund is to finance four Government programs: 10

• Federal Data Processing Centers (FDPC). The objective is to make the FDPC the primary source of supply for ADP time whenever the FDPC can meet agency requirements economically.

• Maintenance Program. At present ADPE maintenance normally is obtained from the equipment supplier. This program considers the possibility of in-house Government maintenance programs when they offer lower cost alternatives.

• Software Program. The ADPE Fund is used both to purchase and to develop generalpurpose software when such software has a known multi-user application. Current applications include a manpower and payroll program and an automatic flow-charting program.

• Lease Program. The ADPE Fund can be used to acquire ADPE for an agency if the agency's lease versus purchase analysis indicates that leasing is preferable but potential later use of the equipment by other agencies would make purchase more economical for the Government. Sometimes purchase options expire before the agency is able to acquire funds through the usual budgetary processes.

To optimize the use of its limited purchase funds and to support a coordinated Government-wide purchase program, GSA, in conjunction with OMB and other Federal agencies, is revising its Management Information System (MIS). The revised MIS will contain the

U.S. Comptroller General, B-115369, Multi-Year Leasing and Government-wide Purchasing of ADPE Should Result in Significant Savings, Apr. 30, 1971, p. 30.

10 Enclosure 2 to a letter from the General Services Administration to the Commission concerning Business Equipment Manufacturers Association (BEMA), Nov. 1971.

basic report elements needed to make detailed lease versus purchase analyses and to prepare a Government-wide "best buy" list.

Most Federal agencies lease ADPE using funds appropriated for a single fiscal year. Complications arise when leases run beyond the fiscal year for which Congress has appropriated funds. GAO has held that in the absence of specific statutory authorization an agency does not have the authority to enter into a multi-year lease using annual funds."

Most industrial firms obtain ADPE on longterm lease rather than on a lease for one year or less and thereby often obtain a monthly rental rate substantially lower than that paid by the Government for one-year rentals. Longterm leases can be obtained for less than 80 percent of the cost of a one-year lease. In a GAO report, seven major manufacturers were cited who offered multi-year lease options for installed ADPE. If the Government had chosen those options, the cost of ADPE rental to the Government could have been reduced by as much as $26 million for a three-year period. If the system had been covered by five-year leases, leasehold savings as high as $70 million could have resulted.12

Often the monthly rental rates shown in the Federal Supply Schedule for single systems are used by the Government in making purchase versus rental analyses. These one-year rates are not realistic for a true purchase versus rental analysis which covers a longterm requirement. If the industry offers lower monthly rental rates for multi-year leases, such rates should be used in these analyses. Use of the long-term rates will change the lowest cost lease or purchase alternative as illustrated in Appendix E, tables E-4 and E-5.

Cost of Money and Time in Acquisition

The cost of money, when associated with the elapsed time from an agency's determination of a need to installation, is another factor that must be considered. A one million dollar saving this year is more valuable than a one million dollar saving five years from now. The

11 Note 9, supra, p. 21.

12 Note 9, supra, pp. 16-17.

cost of money over time can be determined by rules contained in OMB Circular A-94.13 An illustration of the potential savings on only one ADPE procurement is contained in Appendix E. Net savings to the Government during the life of the system rose from $23.57 million to $28.95 million solely by reducing the time to installation from five years to three years.

The magnitude of these potential savings is such that the highest priority should be placed on means for accelerating the time from determination of need to installation of equipment.

Procurement Methods

Both the FPR and ASPR authorize various types of contracts, pricing arrangements, and purchasing techniques. In addition, the FPMR includes special contract provisions for negotiation and procurement of ADPE, software, maintenance, and supplies that are mandatory for all Federal procuring activities and in that respect take precedence over FPR and ASPR.14 Agencies and industry have indicated some concern regarding the (1) late execution of follow-on Federal Supply Schedules for lease and maintenance of ADPE; (2) length of time required to obtain an ADP system; and (3) benchmarks. These concerns are described below:

• Late execution of follow-on Federal schedules for lease and maintenance of ADPE. These schedules are generally negotiated for a one-year period. If a follow-on contract is not in effect at the expiration date, the agency must have the equipment removed or obtain permission to continue to use it without contract coverage. If requirements still exist and essential equipment is retained and used without contract, the Government must eventually pay for its use. Sometimes equipment is used without contact coverage for several months. GSA has indicated that delays in negotiation of follow-on contracts often are caused by industry. Since these are single-source negotiations, GSA does not

13 Office of Management and Budget, Revision of Circular A-94 (Discount Rates), Nov. 15, 1971.

14 FPMR 101-32.408-4 and 408-5.

want agencies to pay for services during the period of negotiation of contract expiration because they believe money due the contractor is an inducement for concluding negotiations on better terms. Industry indicates that nonpayment for services obtained after contract expiration is an unfair negotiation practice.

Several steps have been taken by GSA to alleviate the problem, including staggered contract periods. Apart from the question of negotiation techniques, prompt payment for services obtained is a basic policy of the Government. Contractual arrangements can be made to carry out this policy by an option provision in the contract for payment at the same prices, terms, and conditions, subject to retroactive adjustment, for equipment or services continued in use at the sole discretion of the Government. As an alternative, agencies could enter into an interim agreement with the supplier based on the provisions of the old contract.

• Length of time required to obtain an ADP system. This time extends from a few months to several years and is probably the single item of greatest concern to Government and industry. Much time is expended by the using agency in defining requirements, evaluating various alternatives, and, if required, processing the procurement request through GSA review channels. Other delays occur during the procurement phase in solicitation, selection, and contract execution. For large, complex systems, production after contract award may further extend the time period.

Analysis on a total cost basis of every element of the process at requiring agencies and at GSA should identify actions that are not cost-effective. The most obvious deficiency in carrying out the process is the lack of procurement participation in agency business decisions from the inception of requirements. This deficiency may be due to lack of procurement capability, organizational structure, or sourceselection board concepts. Contracting officer participation in business decisions that have an impact on the final contract is a prerequisite to procurement at the least total cost.

• Benchmarks. These are a series of computer programs designed by the using office as representative of the workload that will be processed. Benchmark requirements are incorporated in Government solicitations for computers. The Business Equipment Manufacturers Association (BEMA), in a poll of equipment manufacturers, obtained a general estimate that as much as 50 to 80 percent of the cost of bidding is tied to benchmarks, mainly because they are individually designed and developed separately for each procurement.

Acquisition procedures should be tailored to the equipment that is being acquired. Often more than half of an agency's budget for an information system may be expended before the specifications are released to industry.15 The use of standard benchmarks would substantially reduce these costs.

BENCHMARKS

Recommendation 14. Develop and issue a set of standard programs to be used as benchmarks for evaluating vendor ADPE proposals.

Top-management officials give a great amount of attention to equipment-oriented details. The emphasis is on computer performance and evaluation rather than ADP personnel costs. For example, each new system now involves a completely new set of benchmark programs with the attendant personnel costs of their development. One solution would be to develop a set of standard programs for use as benchmarks. At the time of acquisition, an appropriate sample of the standard programs would be selected. Vendors and procuring personnel would become familiar with the standard programs, and only the program mix would change from one procurement action to another. The Center for Computer Science and Technology, an organization in the NBS Institute for Applied Technology, is a logical choice to develop standard benchmark programs.

15 Waks, Implications for Acquisition of Military Information System Technology, Report MTR-101, the Mitre Corporation, 1966.

LATE PROPOSAL CLAUSE

Recommendation 15. Change the late proposal clause regarding ADPE to conform to other Government procurement practices.

A mandatory clause permitting consideration of late proposals or modifications is required by FPMR 16 in all solicitations for ADPE. This clause differs from late proposal or late bid clauses used in the acquisition of other equipment by Federal agencies, including DOD. The FPMR provisions indicate that normally the only late proposals or modifications that will be considered are those that offer a lower price or more favorable terms and do not require a technical reevaluation.

The question of cutoff for acceptance of revised or late proposals or bids has been dealt with by GAO and executive agencies for many years. Generally any provision or practice that provides industry with more than one "bite at the apple" is not appropriate for Government procurement although there may be advantages in isolated cases. We analyzed the ADPE late proposal modification clause in contrast to other types of procurement and could find no justification for use of clauses in ADPE solicitations that are not consistent with those used in other Federal procurement.

Maintenance

The Government, in addition to acquiring ADPE and software, buys maintenance service or performs in-house maintenance, or does a mix of both.

Maintenance service is available from either the ADPE manufacturer or another contractor. The contract may provide for on-site or oncall service on a time and materials basis or at a monthly rate. Under a maintenance agreement, a call is made for a maintenance man when the computer malfunctions. The response time, usually two hours, is spelled out in the contract. This permits the contractor to spread his services over a geographic area where several installations may exist and permits stocking of spare parts on an area basis. Because

16 FPMR 101-32.408-4.

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