lays in grantee missions. Many contractors would likely choose to make a blanket exclusion of grantee participation while others might discriminate from grantee to grantee.

The entire option concept would be disruptive of the current efforts of the Government in cooperation with its grantees to provide a uniform system for grant administration that minimizes Federal control.

IMPLEMENTATION BY GRANTOR AGENCIES

The majority position proposes that grantor agencies promulgate regulations, audit product or service use, and oversee implementation of policies governing grantee use of Government supply sources. Aside from the enormous bureaucracy and cost of every agency developing and conducting such a policing effort, experience has shown, during the period immediately preceding the November 14, 1972, termination of grantee procurement through Government supply sources, that grantor agencies have a strong bias to encourage such grantee procurement. This bias often overrides national policies concerning total economic cost and reliance on the private sector. It is not realistic to expect grantor agencies to effectively police access by their own grantees to Government supply sources.

INCREASED GOVERNMENT-WIDE CONTRACT PRICES

Allowing grantees to make purchases from Federal contracts and schedules at the Government discounted price may ultimately result in higher contract prices for the Federal Government. The extension by a contractor of his discounted prices to grantees results in a loss of revenues which can be significant when a major portion of the grantee market shifts from the commercial to the Government contract source. In such cases, contractors must recoup these lost revenues from increased prices to their commercial customers. The Government will have no means for assessing the impact on the prices it pays. Most likely the competitive market would force the contractor to re

cover the loss of revenue from Government contract prices.

LOSS OF TAX REVENUES

To the extent that the Government supplants local commercial business in supplying Federal grantees, the State, local, and Federal governments lose tax revenues. In addition to the Federal and State income tax they pay, private suppliers account for a significant amount of State and local revenue related to property, inventory, and franchise taxes, as well as taxes on the salaries of employees. Also, the transactions of private suppliers produce sales tax revenues which are not applicable to GSA transactions. Thus, the use of Federal sources by grantees could be disadvantageous to State and local governments.

EFFECT ON SMALL BUSINESS

Of similar importance is the fact that the availability of a strong distributor system is vitally important to manufacturers. It is frequently an impossible financial burden for small manufacturers to maintain an effective nationwide distribution organization of their own. They can obtain representation in many markets only by taking advantage of the existing marketing organizations of independent distributors and retailers. Taking the grantee market away from these local suppliers could spell disaster for them as well as the manufacturers which they represent.

Use of Federal Supply Sources By Cost-type Contractors

The practice of permitting contractors performing under cost-reimbursable contracts to have direct access to Federal sources of supply and services has prevailed for many years without controversy. Under a cost-reimbursable contract, the contractor in many ways. is treated as if he were acting as an agent of the Government in carrying out that por

tion of the contract involving purchase of supplies or services. Title to the acquired property passes to the Government upon delivery by the vendor. Records of purchase, cost, and accountability are maintained in accordance

with the terms of the contract, and the supplies or services can readily be controlled for intended use. There do not appear to be any reasons not to continue access to Federal sources by cost-reimbursable contractors.

processing centers. OMB exercises fiscal and policy control over all aspects of ADPE acquisition, including feasibility studies. GSA negotiates Federal schedules for use by all agencies, makes specific purchases for agencies, establishes acquisition controls and procedures, and delegates procurement authority on a case-by-case basis. FPASA also authorizes the Secretary of Commerce to (1) provide agencies and the Administrator of GSA with scientific and technological advisory services for ADP and related systems and (2) make recommendations to the President for the establishment of uniform Federal ADP standards. The National Bureau of Standards (NBS) provides advisory services to agencies regarding technical aspects of the selection and use of ADPE in Federal Information Processing Standards Publications (FIPS PUB).

Agencies are responsible for requirements determination and also for procurement when authorized by GSA. Agencies have established organizational controls including staff review of all actions required by GSA. Some agencies, such as DOD, have also established high-level source selection procedures patterned after the process used in selection of a major weapon system.

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 101-32.801-8.

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.