to extensive product data and management information for complex systems such as space vehicles, transportation systems, and nuclear powered ships.

The annual cost of acquiring product data and management information from contractors amounts to billions of dollars. The Blue Ribbon Defense Panel 22 reported that the cost to the Department of Defense (DOD) for management system application and related reports alone was about $4.4 billion in fiscal 1969.

operations, supply, and other units concerned with the program.

Planners must use an "authorized data list" to select the information they require. New or revised data requirements must be separately identified and approved by the program/project manager. Frequently, a special board reviews such requirements. When finally approved, the consolidated data requirements become part of the contract.

Product Data

Recommendation 33. Establish standards and criteria for estimating costs and benefits of product data requirements. The need for product data should be determined on the basis of cost-benefit analyses. Selective afterthe-fact reviews should be used as a basis for eliminating unnecessary requirements.

The Government needs data describing the product or service being furnished under a contract for a wide variety of purposes. Typical needs for even the simplest equipment include maintenance and operation manuals, replacement parts lists, and inspection or quality control data. If the product or service is complex or critical, the need for descriptive data tends to be urgent and voluminous. Although we do not question the legitimacy of these requirements, we believe that there is a tendency to acquire excessive or unnecessary data. We recognize that effective control of the quantity and cost of acquired data is an immensely difficult task. Nevertheless, the potential for vast savings clearly indicates the need for a continuing effort to minimize data requirements.

DOD has long recognized this potential for savings and has established a data management program. Prior to soliciting proposals for a new major program, a "data call" requests that the data needed from contractors be identified. The data call is directed to program management, engineering, training, maintenance,

"Blue Ribbon Defense Panel, Report to the President and the Secretary of Defense on the Department of Defense, July 1970, appendix E (Staff Report on Major Systems Acquisition Process), D. 45.

EARLY ACQUISITION OF DATA

Despite the notable progress of the DOD data call program and the continuing efforts of other agencies, unnecessary and costly acquisition of data persists. In requests for proposals (RFP) for items not yet designed, agencies routinely require preservation, packaging, and transportability plans; field and depot support plans; personnel subsystem development plans and other planning information. The value of such data at that point is questionable, as the data have little impact on a decision to select one contractor over another.

The Government frequently acquires data for future competitive procurements. This policy, although sound in intent, is impractical when the data acquired cannot be effectively used by competitors. Further, when agency officials do not have a sound basis for deciding what specific data should be acquired, the result is a costly exercise that fails to establish additional competitive sources.

One technique which can help to reduce data requirements is to defer the delivery of data until a firm requirement can be economically determined based on actual operational needs. Delivery can be required at any point during performance of the contract or within two years from either acceptance of all items (except for data) on the contract, or termination of the contract, whichever is later.

Another technique is to defer ordering data. at the time the contract is initiated. Under this method, when firm data requirements are determined, they are negotiated separately with the contractor; a specific delivery date also is negotiated.23

23 ASPR 9-502(b)-(c).

A Harbridge House study of three prime contracts for the Air Force revealed that deferred delivery could have lowered total data costs by about 27 percent.24

PRICING OF DATA

The Government does not have an effective policy for pricing data. Although individual agencies develop cost estimates, there is no program for establishing adequate criteria for identifying data costs.

In quoting the price for data, contractors usually include only the cost of data preparation and reproduction. Thus, their stated prices rarely represent the real costs of the data since such costs often are inextricably mixed with engineering or other program costs.

CONCLUSIONS

While DOD and other agencies urge the procurement of minimum essential data, costly and nonessential data continue to be acquired. The potential for significant savings is evident from the large expenditures for this purpose.

Early requirements for data compound the problem of estimating total program costs, often result in the acquisition of unneeded data, and are of little value in the sourceselection process. The acquisition of reprocurement data is inherently imperfect and may not be advantageous to the Government when all factors are considered. Deferring the procurement of data for up to two years after completion of a contract can effectively reduce data costs.

Standards and criteria for realistically estimating costs and benefits of data should be developed on a Government-wide basis. The need for data should be determined on the basis of cost-benefit analyses prepared and retained by the requestor for later validation and review.

24 Harbridge House, Inc., A Study of Requirements for Data and Management Control Systems in Three Engineering Development Programs, Feb. 1970, p. VII-26.

Management Systems

Visibility of contractor operations frequently dictates the use of designated management systems for reporting specified contractual data. No single "management system" 25 exists and, in fact, no one system could produce all of the information and reports needed concerning a complex contract.

The lack of adequate criteria and standards for the imposition of management systems on contractors has resulted in a proliferation of agency systems which frequently require overlapping or duplicative information. These systems often are incompatible with the manner in which the work is performed, thus requiring a contractor to alter his existing systems or to implement separate systems to satisfy Government requirements. The uncoordinated or fragmented specification of management systems results in unnecessary frustration to both Government and industry personnel. More importantly, the excessive costs that may may be incurred ultimately are passed on to the Government. As in the case of data acquisition, there is great potential for cost savings by minimizing requirements for management systems.

CRITERIA FOR MANAGEMENT SYSTEMS

Recommendation 34. Establish Governmentwide criteria for management systems which are prescribed for use by contractors, including standards for determining missionessential management data requirements.

GOVERNMENT NEEDS

Government program managers must know the details of their programs and be able to identify actual or potential problems. They are

25 U.S. Department of Defense, DOD Instruction 7000.6, Acquisition Management Systems Control, Mar. 15, 1971, defines a management system as: "A documented method for assisting managers in defining or stating policy, objectives, or requirements; assigning responsibility; controlling utilization of resources; periodically measuring performance; comparing that performance against stated objectives and requirements; and taking appropriate action. A management system may encompass part or all of the above areas, and will require the generation, preparation, maintenance, and/or dissemination of information by a contractor."

expected by their superiors, Congress, and the public to have instant, accurate information about all aspects of their programs. Congress also requires extensive information from agencies, much of which derives from that furnished by contractors. Despite the volume of information now furnished to Congress, it is the opinion of several congressional committee staffs 26 that additional or different information is still needed.

The Government program manager is continually frustrated by the lack of accurate and timely reporting by industry, even when management systems are specified in the contract and paid for by the Government. The contractor's ability to supply exactly what is required frequently is limited because his management methods and systems will not readily produce reports in the content and format specified.

27

visions of his contract would result in an additional cost of $400,000 to $500,000. He attributed these costs principally to two features of the system: prescribed work-level reporting in unnecessary detail and added direct costs.

Despite myriad reports routinely submitted by contractors, the Government often levies one-time special requirements for information, including numerous telephone requests. Although such requests may be legitimate, their frequency suggests that much information in routine reports may not be required or may not be usable in the form presented. This highlights the need for the Government to limit information requirements to those which are essential. Moreover, consideration should be given to the contractors' internal management systems in order to integrate information requirements to the maximum practical extent.

CONTRACTOR PROBLEMS

Contractors have a difficult problem in attempting to satisfy various management system requirements simultaneously because the systems are not coordinated and frequently are incompatible. A contractor must have management systems and reports to run his business, but the information produced for his internal use often does not satisfy the management systems and reporting requirements imposed by the Government. Neither the Government nor industry is satisfied with the cost-benefit aspects of acquiring management information. Both feel that the costs involved are excessive and consume contract dollars that could be better used for other purposes.

Industry personnel generally acknowledge the need for and intent of management systems. They contend, however, that implementation of policy directives by procuring agencies does not always conform to the intent of the directed system and that the resulting benefits are not worth the cost. One contractor estimated that on a five-year contract, compliance with the required management systems pro

Study Group 9 (Reports and Management Controls), Final Report, Oct. 1971, p. 72.

DOD/INDUSTRY STUDY OF MANAGEMENT SYSTEM REQUIREMENTS

In 1966, a joint DOD/industry committee 28 was organized to examine ways of insuring effective management of defense programs while minimizing the degree of control over industry. As a result of this effort, the number of management systems used by DOD has been reduced from 1,200 to 129, excluding those specifically required by standard ASPR clauses. These systems are identified in the Acquisition Management Systems List (AMSL).29 Despite the reduction in the number of systems, the services have found that systems in the AMSL and the accompanying implementing directive 30 do not adequately reflect DOD acquisition management policies. As a result, the list is not effective for either planning or control purposes.

The Assistant Secretary of Defense (Comptroller) authorized the Air Force, at its request, to field test suggested improvements in the program for controlling management sys

27 Ibid., p. 260.

28 DOD-CODSIA (Council of Defense and Space Industries Association) Advisory Committee for Management Systems Control.

29 U.S. Department of Defense, DOD Manual 7000.6M, Authorized Management Systems Control List, July 1970.

30 U.S. Department of Defense, DOD Instruction 7000.6, Acquisition Management Systems Control, Mar. 15, 1971.

tems.31 The test 32 will explore the feasibility of defining management systems by generic categories rather than by documents per se, the use of planning guides in place of the AMSL, and the use of preprinted application checklists to trace decisions. The test also will correlate and tailor management systems and data requirements to provide an integrated list of required management documentation. Although the test has not been completed, we believe the concepts being explored are sound and offer the potential for materially improving the effectiveness of the acquisition of both management systems and related data products.

DOD PERFORMANCE MEASUREMENT FOR SELECTED ACQUISITION SYSTEMS

Indicative of the costs associated with current management systems are those associated with DOD Instruction 7000.2, Performance Measurement for Selected Acquisition.33 This directive requires the use of Cost Schedule Control System Criteria (CSCSC) on all defense programs estimated to require more than $25 million in research and development or $100 million in production funds. It is intended as an overall mechanism to monitor contractors' costs and delivery schedules.

We found varying estimates of how much it costs contractors to comply with this one system. Individual contract proposals have inIcluded as much as $4 million to establish it. Other estimates varied from 1 to 1 1/2 percent of the contract cost.34 Some contractors were reluctant to quote figures because they could not segregate this additional cost from changes they were making voluntarily to meet their own needs. Whether such costs are separately identifiable makes little difference since the Government ultimately must pay for them.

The use of management systems by other executive agencies differ widely. NASA has requirements similar to those of DOD. GSA has

31 U.S. Department of Defense, Assistant Secretary of Defense (Comptroller) Memorandum for Secretary of the Air Force, Field Test of Proposed Improvements in the Management Systems Control Program, Jan. 21, 1972.

32 Ibid., Encl. 2.

33 U.S. Department of Defense, DOD Instruction 7000.2, Performance Measurement for Selected Acquisition, Apr. 25, 1972.

34 Note 26, supra, p. 257.

little need for complex management systems because of the predominant use of fixed-price contracts based on firm specifications. GSA's quality assurance system is basically one of inspection for compliance with specifications, and its financial operations are straightforward. The newer agencies (such as Health, Education, and Welfare; Housing and Urban Development; and Transportation) are still developing management systems as their programs expand. We observed increasing concern by contractors and Government agencies that these newer organizations might be developing management systems which are incompatible with contractor systems or with Government-prescribed systems already in

force.

CONCLUSIONS

A major improvement in the procurement process, with attendant cost reductions, could be achieved by more effective control over selection and imposition of management systems on contractors. Although top-level Government officials have recognized the need for improvement in this area and progress has been made, more is needed.

The concepts currently being field tested by the Air Force are sound and should enable DOD to better define and selectively use management systems. This, in turn, should enhance its ability to ensure better integration of systems requirements which are more compatible with contractors' internal operations. We urge that this test be pressed to completion in order that further improvements to the management system program can be implemented at the earliest practical date. Experience with the revised DOD program should be closely analyzed for the feasibility of Government-wide application.

GOVERNMENT PROPERTY

For procurement purposes, Government property is limited to property owned 35 by the

35 In some cases the Government's interest is a leasehold interest rather than full ownership or title.

Government and provided to a contractor for use in the performance of Government contracts. Government property may be provided to contractors by two different methods: The Government may acquire the property and furnish it to a contractor; or the contractor may acquire the property and retain it under contract terms which vest title to the property in the Government immediately upon acquisition by the contractor. Under the Armed Services Procurement Regulation (ASPR), the two kinds of property are called "Governmentfurnished property" and "contractor-acquired property." 36 As the agency which furnishes the most property to industry, DOD is the agency with most experience of this kind.

Under the ASPR,37 Government-owned property is categorized as material, special tooling, special test equipment, military property (for example, aircraft), and facilities (for example, production plants and equipment). It also includes such production aids as models, drawings, and reproduction data. Material includes property that may be incorporated in an end product or that may be consumed or expended in the performance of a contract (such as raw and processed materials, parts, components, small tools, and supplies).38

Government Policy

The general policy of DOD is that contractors furnish all material required for the performance of Government contracts; 39 however, exceptions are made when it is in the Government's interest. The Government may have to acquire materials and components and furnish them to contractors (1) to assure uniformity and standardization among different producers; (2) in the case of long-lead components, to expedite production of the end product by starting component production before the contract for the end product is awarded; or (3) to take advantage of Government priorities under a controlled materials system during a period of defense emergency that causes materials

ASPR 13-101.2.

"ASPR 13-101.1.

ASPR 13-101.4.
ASPR 13-201, 13-301.

shortgages. The Government may want to use up its stocks of materials and special tooling, special test equipment, or other equipment,40 rather than acquire more.

42

In accordance with a current defense policy to "stay out of the facilities business," 41 providing new facilities to contractors is limited to situations involving existing Governmentowned, contractor-operated (GOCO) plants, planned mobilization requirements, and other special cases where there is no practical alternative. Some equipment or plant improvements may be so specialized that their only possible use is for Government production. Because of the unpredictable nature of future Government requirements, contractors cannot always count on enough long-range business to fully amortize their investment in such special property. They, therefore, may be unwilling to provide it at their own expense and risk. In such cases, the Government may have no alternative but to finance the new facilities or to motivate the contractor to acquire the needed property.43

44

A recent GAO report to the Congress " stated that in June 1971 DOD-furnished plant equipment had declined to $4.1 billion from $4.6 billion in December. The $4.1 billion included $2.2 billion worth of industrial plant equipment (IPE) such as lathes, milling machines, and drills. The $1.9 billion balance was the value of other plant equipment such as machines costing less that $1,000, furniture, vehicles, and computer equipment.

The report stated that, although in March 1970 the military services and the Defense Supply Agency (DSA) were directed to require contractors to submit plans to phase out their use of Government-owned facilities, the Deputy Secretary of Defense has permitted deferment of these plans at contractor plants where mobilization base requirements are being developed and where phase out would be contrary to Government interests or would create an economic hardship for the contractor. As of June 30, 1972, DOD had received all

40 ASPR 13-201, 13-304 (a), 13-306.1.

41 In Mar. 1970, DOD initiated a program to phase out Government-owned facilities at contractor plants. Memorandum from the Assistant Secretary of Defense (I&L), Mar. 4, 1970, published as Item I, Defense Procurement Circular 80, June 22, 1970.

42 ASPR 13-301(a) (i), (ii), and (iii).

43 Study Group 9, Final Report, Dec. 1971, p. 143.

44 U.S. Comptroller General, Report B-140389, Further Improvements Needed in Controls Over Government-owned Plant Equipment in Custody of Contractors, Aug. 29, 1972, p. 1.