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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:

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.

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.

LATE PROPOSAL CLAUSE

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. 1.5 The use of standard benchmarks would substantially reduce these costs.

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.

BENCHMARKS

Maintenance

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.

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 of the importance of computer operations to the mission of an organization, maintenance contracts often provide for maintenance personnel to be physically located on-site. Maintenance by Government personnel is not normally undertaken unless service is not readily available from a contractor or the need for maintenance occurs at remote or combat installations.

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

16 FPMR 101-32.408-4.

Users prefer on-site maintenance because of the importance of computer operations to mission accomplishment. On-site maintenance can be inefficient and expensive because when the computer is operating, maintenance personnel are underutilized. Conversely, when the computer is down, computer operators are idle. A more cost-effective approach might be the combined use of maintenance and operating personnel. This could be accomplished by contract or by use of Government employees. Maintenance personnel would be on-site at all times. When they were not doing maintenance, they would operate the computer or perform related functions. Even when the equipment is rented, combined operator-maintenance should be considered.

be difficult to achieve because of significant differences in agency missions.

The benefit of substantial discounts may be available through improved procurement management within an agency and in interagency coordination. As GAO noted, the Marine Corps centralized its procurement of software and acquired two standard software packages in multiple copies at a substantial discount.

Although software standardization is increasing, many noncompatible systems are still on the market. The delay required to ascertain compatibility can be expected to take at least 20 working days; this is now the time required to process an agency's request for delegated authority to procure software. It could be 130 calendar days; this is now the time required for advance notice for the release of equipment in Government inventory. In either case, the delay of one to three months can be a highly restrictive factor in software procurement.

Personnel and associated costs involved in establishing and maintaining a central catalog of software, or of other products, also must be considered. In addition, manufacturers would develop new pricing structures on programs previously sold as single or limited system-use products. For example, if GSA were to advise a manufacturer that it would purchase a single restrictive or licensed software product which would then be made available to all Government users, it would be necessary for the manufacturer to raise his price in order to recover all development costs on the single sale. It is more reasonable to envision an extension of the present multi-award contracts for computer software with a provision for the Government to receive the benefits of quantity discounts based on actual purchases of the product concerned.

Software

Comptroller General Report B-115369 17 presents a broad review of the present policies and practices in the acquisition of computer software by individual agencies. It makes broad recommendations regarding the formulation of a master plan for the acquisition and use of software in addition to the structure needed to implement that plan.

The findings of GAO relative to repeated acquisition of the same software package

hout beneht of quantity discounts are significant. GAO noted that private industry generally employs a single purchaser for the total corporate entity. This is feasible because in private industry each corporation generally is oriented toward a single mission. However, in the Government the complete centralization of procurement of computer software would

ADP Supplies

In defining the authority of GSA in imple menting FPASA, the Comptroller General ruled :

17 U.S. Comptroller General, Report B-115369, Acquisition and Use of Software Products for Automatic Data Processing Systems in the Federal Government, June 30, 1971.

... exclusive authority to GSA to procure all general purpose ADPE and related sup

plies and equipment for use by other Federal agencies.18 (italics added)

Strictly interpreted, this decision requires agencies to obtain a waiver in order to procure ADP supplies. GPO has operated under a continuing waiver from GSA to contract for all marginally-punched continuous forms.

Paper supplies in the form of tabulating cards, punch-paper tape, and continuous forms are unique in the data processing field because they are standard. Since the early days of tabulating cards, there has been a single standard size for punched cards; and early in the development of high-speed printers, manufacturers standardized the sizes of printed forms. This has been done to such an extent that today only forms designed for particular optical-character or optical-mark reading applications are machine-dependent. Work is now underway at NBS to correct this.

The distinction between ADP paper supplies and general paper supplies is rapidly disappearing. Agencies currently use manually prepared checks, which are later processed through a data processing operation, as well as plain typewritten pages that both communicate with people and are machinereadable. Limiting authority to GSA for the procurement of ADP supplies unduly complicates their acquisition and appears to be unwarranted.

These three agencies seem to have construed their authority and responsibilities for ADP quite narrowly, being concerned almost exclusively with property management ... Telecommunications and data processing are treated separately from ADPE equipment almost everywhere including the central agencies. The technology and new applications in many agencies clearly demonstrate the emerging interdependence of the two, and the need to consider common management of both in the future. [The Government is not motivated, equipped, or structured well for development of the most effective use of ADP; and few of the presently constituted Government-wide ADP entities have demonstrated either the necessary capability or intentions to lead the charge in this area, which represents about 70 percent of total ADP costs. Executive agencies seem to have been so diverted in purpose or constrained by externally imposed concern with direct economy of ADP acquisitions and operations that they do not feel free, and therefore fail to pursue the best use of ADP technology.) 19

It should be recognized that substantial savings in ADPE procurement must be realized to offset the administrative costs that are now associated with it. Elaborate controls and approval processes that have been built up are stifling the use of computers in new applications and have stretched the computer acquisition cycle to well over two years. A frequent result is that the Government buys bigger computers than it needs because the computer is obtained to handle a sophisticated workload, which may be only a small part of the total workload. The technology exists to give users access to sophisticated computers, but smaller computers can be used for routine tasks. Economy is measured only in terms of the speed of computers, rather than the efficiency of the total data processing task. The large hardware costs are tied to the large computers, with about 10 percent of the Government computers representing more than

National Policy

GSA, NBS, and OMB all have leadership responsibilities for the Government-wide acquisition of ADPE. A Federal ADP users task force found that: ... the legislative branch and central executive agencies have generally confined their principal concerns with ADPE hardware and software to maximize economy in its acquisition and efficiency in clock time utilization, with only a residual concern with more effective use of the ADP technology in terms of executive branch missions and functions ...

B-151204/B-157587, Jan.

18 U.S. Comptroller General Decision 10, 1969. appendix D.

19 U.S. Interagency Committee on Automatic Data Processing Equipment, Report of a Task Force on Long-Range Plans for Automatic Data Processing Equipment in the Federal Government, May 1971.

50 percent of the total purchase costs. (See Appendix E.)

The scope and complexity of Government acquisition and operation of ADP systems warrant national attention regarding standards for ADP, visibility and effective use of total resources, and coordination of acquisition of new or additional resources. Current legislation provides an effective mechanism for assuring necessary management attention. Implementation of this legislation, while alleviating some of the problems existing prior to enactment of the current version of FPASA, appears to have administratively stifled the overall program by preoccupation with procedures directed toward improving acquisition price.

those used in the acquisition of other equipment and systems could not be determined, nor could it be justified.

There are many problems associated with Government-wide procurement of computer software. The extension of Federal Supply Schedule contracts for software with provisions for quantity discounts should be explored.

Vesting Government-wide purchase authority in GSA for all ADP supplies is not necessary.

Adequate consideration has not been given to the increased costs and delays arising from complex procurement procedures.

FOOD

Conclusions

National management of ADP resources by GSA is a special responsibility. It does not require that GSA directly procure computers for use by a single agency'.

The present rules for delegating ADPE procurement authority to agencies are overly restrictive. Clear and practical procedures are essential for effective planning and optimum use of manpower. Agencies that have the necessary procurement expertise should be authorized to acquire their own systems except when centralized procurement by GSA is clearly more cost-effective.

The ADPE Fund has not been capitalized adequately to take advantage of “best buy” situations.

Multi-year leasing would permit the Government to benefit from potential cost savings and could relieve the problem of maintaining and disposing of obsolete ADPE.

The policies and procedures for evaluating alternatives in fulfilling an agency's ADPE requirements are generally effective, but complexities in the approval procedures may account for the present lack of adequate consideration of services as an alternative. The current lack of visibility regarding available commercial and interagency services reduces effective use of services as an alternative.

The basis for use of late proposal provisions for the acquisition of ADPE that differ from

In fiscal 1971 the production, processing, distribution, and preparation of food in the United States was a $140 billion a year business and represented about 14 percent of our gross national product (fig. 2). Statutes designed to help or to protect the public consumer involve the Government in many aspects of the entire business. No other commercial product is so inherently and necessarily subject to the degree of production, packaging, and quality controls by all levels of Government. No other industry in recent years has been involved in as many congressional hearings, consumer protection activities, and controversies regarding the effectiveness of industry-related Federal programs.

Recommendation 16. Assign responsibility for consistent and equitable implementation of legislative policy concerning food acquisition to the Office of Federal Procurement Policy or to an agency designated by the President. Recommendation 17. Establish by legislation a central coordinator to identify and assign individual agency responsibilities for management of the Federal food quality assurance program.

The Commission's review of Government food acquisition was undertaken in response to congressional, industrial, and user interest. Many studies, investigations, congressional

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