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pose equipment as we do on the general-purpose ADPE which we are managing and giving special management attention.
Chairman PROXMIRE. Can you give those figures for the record to the extent they are not classified !
Colonel WARREN. I don't have those figures.
Colonel WARREN. I have all of the figures for the general-purpose ADPE which we manage and I do not believe the other figures are available.
Chairman PROXMIRE. Does anybody know what they are? Would the Secretary of Defense know or anybody in his office ?
Colonel WARREN. I really don't know whether a figure would be available. It would be part of a total weapons system cost, and the total weapons systems costs would be broken out in some detail, and to the extent that computers or ADPE are detailed as part of the total cost it would be available. In some cases it is and in some cases it isn't, but I do not believe that we have a one-round total figure for ADPE for weapons systems; no, sir. The project manager for each weapons system should have a number or figure as to what the ADPE hardware and software cost are as part of his system.
GENERAL PURPOSE ADPE COST $720 MILLION IN FISCAL YEAR 1969
Chairman PROXMIRE. Mr. Abersfeller, can you tell us the total amount spent for purchases or rental of ADPE by all Federal agencies?
Mr. A BERSFELLER. Yes. In fiscal year 1969, reported total procurement and contract award value for general-purpose computers and punchcard equipment exceeded $720 million.
Chairman PROXMIRE. How much?
Mr. ABERSTELLER. $720 million and, by the way, Mr. Chairman, again I don't have the dollar volume of procurements for defense and we will provide that if you would like so far as the general purpose computers.
Chairman PROXMIRE. I would like to reconcile that with the estimate made by the Comptroller General this morning, that, you may have heard it.
Mr. ABERSFELLER. I did not.
Chairman PROXMIRE. He made an estimate that the total Federal estimated costs of ADPE, which may be different from the question I asked, are from $4 to $6 billion per year. Is that excessive and how do reconcile it with the much lower figure you gave me.
Mr. ABERSTELLER. You were asking about the procurement. I don't know, $6 billion is a brandnew figure to me, Mr. Chairman.
Chairman PROXMIRE. In other words, what you gave me and I think what you gave me your answer to was completely responsive. You told me what the procurement and rental costs are and I take it that what the GAO was talking about is the ultimate cost of all computer operations including the contract where the contractor may be using a computer and charging that to the Government.
Mr. ABERSTELLER. He also must have been talking about the acquisition costs of the equipment, Mr. Chairman, because in this report he submitted to the committee
Chairman ProXMIRE. Weren't you talking about the acquisition costs?
Mr. ABERSFELLER. Yes, sir; I am talking about the acquisition costs of $720 million.
Chairman PROXMIRE. All right.
Mr. ABERSFELLER. But he estimates in this report $2 billion annual costs and we have used historically since the days of the Ramspeck Commission $3 billion per year.
Chairman PROXMIRE. The GAO said for general purpose that was $1.9 billion, $2 billion.
Mr. ABERSFELLER. That would coincide with this.
Chairman PROXMIRE. Right. But there were other costs they just couldn't estimate for computers, which they said was between $4 and $6 billion. Can you give us any more precise figure?
GSA PROCURES 84.5 PERCENT OF ALL GENERAL PURPOSE COMPUTERS
Mr. ABERSFELLER. No, sir; I have nothing on that. I do know about the general purpose computers but that is all. I was simply going to add, Mr. Chairman, that of the $720 million spent in 1969, $112.7 million or about 15.5 percent of that figure was delegated to other agencies including defense for procurement. So said another way, GSA buys or contracts for 84.5 percent of all the computers used by the Federal Government, all the general purpose computers.
Chairman PROXMIRE. Now, in connection with the general purpose computers, you have no figures, of course, on the special military operations?
Mr. ABERSFELLER. No; I have not.
Chairman PROXMIRE. DOD buys under a delegation from GSA when it does buy, doesn't it, in the general purpose area?
Mr. A BERSFELLER. Yes, sir.
Chairman PROXMIRE. Do you check on the Defense Department purchases in any way, do you determine whether they are bought at a fair price to the Government or do you simply accept their decisions ?
Mr. ABERSFELLER. Well, with regard to the final decision we accept their decision since we delegate it but we do require rather detailed submission on the part of that department or any other before we grant the request.
Chairman PROXMIRE. Well, that is what I had in mind, you don't grant the delegation until you are sure in your mind!
Mr. ABERSFELLER. And we review the RFP and things of that type and delegate it to them for the procurement and there are plenty of caveats in the authority I sign to be sure it does conform to procurement regulations and our excess reutilization program.
Chairman PROXMIRE. Are there occasions when they have been ready to proceed to purchasing and you have said the price was too high, you had better look at it again?
Mr. ABERSFELLER. There have been none where we have delegated it. I happen to think Defense is doing a very good job in that area, Mr. Chairman.
Chairman PROXMIRE. It is a question of timing here, you see. What I am trying to get at is whether or not your agency exercises any control over the Defense Department in the areas where they make the purchases.
Mr. ABERSFELLER. Not after we delegate it; no, sir. We do not.
Chairman PROXMIRE. I see, because I had first understood you to indicate that you delegated it after you had a chance to look at the specific purchase.
Mr. ABERSFELLER. No, sir; I am sorry, I didn't make that clear. Chairman PROXMIRE. All right. I understand.
Colonel WARREN. I might say all the delegations we receive from GSA carry the stipulation that in all cases we must equal or exceed the terms of the Federal supply schedule, so we never are allowed to buy anything which costs more, or on terms less favorable than those carried in the Federal supply schedule.
Chairman PROXMIRE. And that Federal supply schedule is pretty much GSA determined?
Mr. ABERSFELLER. Yes, sir.
METHOD OF MAKING AWARDS
Representative Brown. Mr. Abersfeller, what is the method by which a determination is made that a system will be purchased from one company over another?
BENCHMARK SYSTEM USED BY GSA
Mr. ABERSFELLER. Well, actually the system generally used is referred to as the benchmark system first, Congressman Brown. The request for quotations is submitted to the entire industry for competitive negotiation. Responses come in and then the equipment is benchmarked to see that it meets the requirements of the specification.
That equipment which does the best job at the lowest cost is then procured.
Representative Brown. The specification then plays a great part in determining who will meet the requirements of the system; is that right?
Mr. ABERSFELLER. Yes.
EXTENT OF COMPETITION
Representative Brown. How much competitive bidding in fact is there? Is it frequent that the specification will be written in such a way that only one company meets the requirements?
Nr. ABERSFELLER. I know of no instance, Mr. Brown, in the many years I have been in this program
Representative Brown. How many years is that?
Mr. ABERSFELLER. Six years, well since the enactment of the bill, it is not that long, it is 5 years, in which there has been the absence of competition in the case the chairman and I were speaking about a moment ago, and this is the far out equipment that agencies like AEC require, not produced commercially, specially made or in the case of security agency requirements, or in some other exceptions generally following the requirements of the law. Section 302(c) of the Federal Property and Administrative Services Act governs pretty much what you can negotiate for on a sole source basis.
Representative Brown. What percentage of computer purchases are competitive?
NEARLY 100-PERCENT COMPETITION ON GENERAL PURPOSE COMPUTERS
Mr. ABERSFELLER. Of the general purpose computers there are,
І would say, well nearly a hundred percent have competition. There may be an occasional one or two where there is not. I am not familiar with all of the security agency procurements in terms of knowing whether those were sole sources or not.
Representative Brown. You said that you purchased 84.5 percent of the general purpose computers.
Mr. ABERSFELLER. Yes, sir.
Representative Brown. So are you saying that a hundred percent of 84.5 percent are competitively awarded?
Mr. ABERSFELLER. Well, a hundred percent of 84.5 percent is competitively awarded, with again a further qualification.
MULTIPLE AWARD SCHEDULES USED
The initial Federal supply schedules are entered into on a negotiated basis with many different companies in the industry. This is known as multiple-award schedules.
Now to the extent that an agency orders from that schedule a particular manufacturer's piece of equipment, to add on to an existing equipment, that might not be competitive in that sense. But in the sense of those contracts which are entered into to meet specific needs, systems needs, those are all competitively awarded.
Representative Brown. Can you give me what percentage that is?
AGENCIES ORDER DIRECTLY FROM SCHEDULES
Mr. ABERSFELLER. No. The problem I have, Mr. Brown, is the agencies order directly from the schedule contract and constitutes almost $520 million worth of procurement from that source.
Representative Brown. That is about a third, isn't it?
Mr. ABERSFELLER. Yes, sir. And it is almost a half, well a little over a half, in fact. And I am not certain how many of those are ordered in a low dollar range as add-ons to existing equipment.
Now agencies are required to get competition, make judgments and do it competitively in those cases where they are considering new systems or substantial parts of new systems and even add-ons where competitive equipment is available.
I don't want to make this any more complex than it is. Let me try it another way. Assume with me for the moment that agency Y has an IBM main frame which was awarded competitively. They now need another memory device of some sort. If there was no plug-toplug capability with another peripheral manufacturer of that
memory device, they would almost be obliged to procure that from IBM, that is the thing I am talking about as the exception. I think, I don't have the figure, but my professional judgment would be a very, very small percentage, but I truly do not know.
Representative BROWN. We heard earlier this morning that when an agency decides they would like to have a computer they must first get their budget okay from BOB based on the total budget, and then divide that down to the priority needs within the agency. The section of BOB which has special knowledge about computers reviews the application before permission of BOB generally is given for the purchase or rental. Then that the request goes to GSA for purchase.
Now, are you telling me that many of the agencies make their own decision without reference to GSA on the equipment that they get or the kinds of equipment that they might rent.
Mr. ABERSFELLER. Well, they make their own decisions within the framework of the rules and regulations which both we and the Bureau of the Budget prescribe, which are very restrictive. Additionally the Federal Supply schedules of which I spoke deal and have certain limitations in them so far as dollar volume is concerned or as far as quantities are concerned.
As an example, it cannot be more than one CPU, if your agener and you want more than one Central Processing Unit you cannot buy it from the schedule. That is a limitation. It must come to us and either we decide to buy the two or three that is required or we delegate it back to the agencies. They can't spend more than $100,000 for multiple peripheral devices. Those are the kinds of restrictions we have in the schedule.
Within the framework of those restrictions, within the framework of the requirement to get competition, to make judgments as to which would be the least expensive, agencies do have the free choice within those restrictions to place orders with the schedule contractors.
Representative Brown. And that restriction results in your purchasing 84.5 percent of all items in this field.
Mr. ABERSFELLER. Well, actually the 84.5 percent which I quoted earlier includes our contracting for the Federal supply schedules. But the restriction results in our getting involved more and more in the procurement of ADP. We are gradually—of course, the whole purpose here is to try to bring a quantity level together which would encourage better prices and reduce costs.
Representative Brown. The agency may turn to you for purchase assistance even though they have the authority to purchase on their own or have received it from BOB.
Mr. ABERSFELLER. For purchase assistance; yes, sir. It would be rather unusual. If they were able to order directly from the schedule contractor I think they would do so.
Representative Brown. One of my concerns about this entire operation is that we have an industry here which some years ago was developed to a great extent as an in-house industry of the Federal Gorernment, or in-house technology with the Federal Government, and when private industry got into the business the needs for computers were predominantly in the Government. So that in the late 1950's or early 1960's the Federal Government tended not only to have dominated the technology of the original development but also the dollars of early purchase with the Federal procurement being exercised in a fairly limited area of the Bureau of the Budget and the company from which to purchase or rent the equipment was being determined by a small group in GSA, is that correct?
Mr. ABERSFELLER. Well, the Federal supply schedules, Mr. Broirn, have always been available to any company who chooses to participate