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So how much real competition do we have and how hard does the Government bargain to secure a procurement at the lowest price?
Mr. ABERSFELLER. I think we have very real competition, Mr. Chairman. The number of procurements we make, or the agencies make, that involve the waiver, because of the Truth in Negotiations Act, is very small, very small, I would think just less than 1 percent of the total dollar value.
There are, generally, three or four, sometimes five or six companies involved in the process of negotiations.
With regard to the peripheral manufacturers, I would want to make the point clear
Chairman PROXMIRE. Three or four or five or six, and then you have your custom specifications so that very often you would only have one or two companies that would qualify?
Mr. ABERSFELLER. You have the general approach to the problem generally for the reasons I mentioned to Mrs. Griffiths and, at least to the best of my knowledge, virtually all the compatible plug to plug stuff works with IBM and IBM alone and, therefore, not knowing what the main frame is going to be it is very difficult for others, and I think the peripheral manufacturers are reluctant to come in on that basis. But Mr. Caveney mentioned the great savings that could be achieved with CalComp and while I disagree with him on the extent of the savings, the savings are obviously there to some extent, I do want to point out to the chair, that CalComp, if it is the same company, California Computer Products Corp. is what I have, is that correct, Mr. Caveney?
Mr. CAVENEY. Yes. Mr. ABERSFELLER. Well, they sent an offer to us on the 30th day of March, and we are negotiating with them and have been since that time, for the schedule. It is a little difficult to suggest that we are not giving them an opportunity. I think indeed we are, but we are not going to enter into contracts with people when we do not believe we are getting a fair and reasonable price, and that may be the issue here.
Chairman ProXMIRE. When three or four compete, and you therefore have what you call competitive negotiations, under those circumstances do you require the compliance with the Truth in Negotiation Act?
Mr. ABERSTELLER. No, sir; because generally those items would be sold in substantial quantities commercially, there is competition, and they would therefore not be required to furnish the data.
Chairman PROXMIRE. Three or four?
Mr. ABERSFELLER. Oh, yes, sir; the Truth in Negotiations Act exempts all procurements
Chairman PROXMIRE. So there is no waiver, there is an exemption it seems?
Mr. ABERSFELLER. The act itself exempts it.
I believe he has missed the point. The document is taking a U.S. tax dollar and converting it to an IBM dollar and a CalComp dollar to indicate the difference in IBM dollars and CalComp dollars pertaining to the GSA award of $330 million to IBM, with the point being the
CalComp dollar is real, but the IBM dollar value must be $3.84 to each $1 of CalComp dollar, or a waste of $160 million. Another point, since IBM was not on the schedule, the committee must understand GSA issues a Federal supply contract, and if you are not on that supply schedule, as we were told we had to be in 1967 by Mr. Abersfeller, or we could not receive an award. GSA does not negotiate specifications, just terms and conditions of the contract, as the selection is not made by GSA, it is made by the specific department within the executive branch.
Now, the peripheral community, on this particular point, would like to ask one question. All those peripheral manufacturers who were on the schedule for fiscal year 1970, while IBM was not yet approved, we would like to know how many received awards while IBM was not on the schedule? Yet why was IBM allowed all of a sudden to receive a $330 million contract, when they hadn't been on the schedule for the latter 4 months of the fiscal year 1970; if these are the rules, and this is what we were told in 1967, what are the answers?
Mr. ABERSFELLER. If I said that in 1967, Mr. Caveney, we will let the record speak for itself, I made a mistake.
The facts are you do not have to be on Federal supply schedule to compete on competitive negotiated or advertised procurements. Obviously no one can place an order with you under the Federal supply schedule concept unless you are under, on the Federal supply schedule, but this does not preclude competitive procurement involving any company that is not on schedule where the solicitations go out separately, that is where we are buying a group of equipments.
Additionally I want to point out, and I may be misreading your testimony, Mr. Caveney, but you are referring here to CD-1 as being plug interchangeable with IBM 2311 disk storage unit. You then relate that to the $330 million and relating the costs between what you call CalComp dollars and IBM dollars and then suddenly relate that to the $330 million on the assumption the disk storage units constitute a certain percentage of that $330 million, and I simply suggest you are wrong.
Mr. CAVENEY. We are not making that connection.
Mr. ABERSFELLER. Anyway there are only 416 of this particular unit in the entire leased inventory as of June 30, 1969, of the Federal Government and, as I said, Mr. Chairman, we could save on the order of $2 million, and we will give you for the record what the total value of those units is. But so far as the $330 million are concerned we negotiated with IBM all year for the schedule, they didn't get paid for their equipment, and this was simply because it was issued late in the game, and simply was made retroactive to the first of the year.
(The following information was subsequently supplied for the record by Mr. Abersfeller:)
As of June 30, 1969, the total net purchase price is $9.2 million.
IMPACT OF COMMITTEE PRESSURE AND HEARINGS
Chairman PROXMIRE. Could I ask you, Colonel Warren, do you think the pressures from the Congress and hearings into this problem give backing to those who would take a hard nosed attitude toward procurement ?
Colonel WARREN. Yes, sir; I certainly do. I think our actions in ADP management reflect the interests of this committee as well as the House Appropriations Committee and the House Government Activities Subcommittee of the Committee on Government Operations.
COST AND PERFORMANCE OF ADPE IN WEAPONS SYSTEMS
Chairman PROXMIRE. Is the Defense Department satisfied with the record of costs and technical performance of ADPE in the weapons systems?
Colonel WARNEN. I am really not prepared to comment on that.
Senator PROXMIRE. Who would be? I have a series of questions in that area and I would like to be able to either ask them to testify at some time later or write them to find out.
Colonel WARREN. Well, I think it would be someone in the Office of the Director of Defense Research and Engineering (O.D.D.R. & E.).
Chairman PROXMIRE. Will you double check that for us? Colonel WARREN. Yes, sir. Chairman PROXMIRE. And when you correct your remarks indicate who it is specifically.
Colonel WARREN. Yes, sir.
(The following information was subsequently supplied for the record by Colonel Warren :)
Dr. John S. Foster, Jr., Director of Defense Research and Engineering, is the appropriate Department of Defense official to address the subject of costs and technical performance of ADPE in weapons systems.
ANY DISCRIMINATION AGAINST SMALL MANUFACTURERS ?
Chairman ProXMIRE. Mr. Caveney, other than the specific testimony, which I think is very helpful you have given us here, in your opinion is there now any real discrimination against the small manufacturers?
Mr. CAVENEY. I would rather wait a few more months before answering in order to see how my G-2 compares with the real facts. Right now we feel great strides are being made but we would like to see more than token acceptance, and until the Navy has completed their contracts on tape drives, I would rather wait until a later date to comment but I do see a great deal being done, and we like what we see so far but only the surface has been scratched as the savings should be in the billions of dollars range.
Chairman PROXMIRE. That is encouraging.
MAINTENANCE CONTRACTS BEING DISCUSSED WITH GSA
Mr. Harmon, have you talked to GSA about maintenance contracts? Mr. HARMON. Yes, sir; we have.
Chairman PROXMIRE. Has the conversation been constructive and useful? Do you think you have made any progress?
Mr. HARMON. Very constructive to date. It should be recognized that we have only been in business 6 months. The Atomic Energy Commission Brookhaven Laboratory was one of our first customers, and we do have some conversations in progress with GSA.
SPECS SOMETIMES RESTRICTIVE
I might comment, however, on the negative side just a little bit. Sometimes the qualifications that come out in some of the specifications from GSA restrict a number of the peripheral manufacturers. This is particularly true as far as service might be concerned, due to the fact that they specify a requirement to have people available on-site to provide service or to have service personnel every place there might be an Air Force Base or other Government installations. It was in recognition of this, as well as other reasons that we establish Comma to try to fill that gap, to help them compete and provide services for them in all of these locations. The restriction on service is one of the reasons why the number of independent peripheral manufacturers did not respond to the RFP Mr. Abersfeller commented on in his testimony, where only two responded yet there were 50 or more in business at that time. I would say there has been great improvement made in this area. I predict that when the responses to the Navy bid on the 2311 replacement are revealed, there will be a great number more than the two responding to that RFP.
COMMITTEE HOPED TO EXPAND COMPETITION
Chairman PROXMIRE. That is encouraging because, of course, we had hoped that the suggestion of the committee would bring a number of new competitors and apparently it didn't do it. But you say now the situation is improving.
Mr. Abersfeller, earlier you said something to the effect that the interface compatibility situation couldn't be solved just by the Bureau of Standards. You feel it is more than that, to bring the greater competition into this operation. I would like to know more about that because the testimony this morning indicated that that really was the crux of it; if we could cross that bridge we would be in good shape.
DIFFICULT TO MAKE STANDARDS
Mr. ABERSTELLER. Well, there are other techniques. I happen to believe very strongly that no matter how many people within reason that you pour into the National Bureau of Standards it is still going to take a long time to get standards out on a very complex subject.
The alternative I alluded to was peripheral manufacturers could today if they chose, and it was obviously profitable to do so, make plugto-plug compatible equipment for other manufacturers equipment. That is something that could be done immediately if it were profitable to do for the peripheral manufacturers.
An example, you can make tape and disk drives for Univac, RCA, CDC, and so forth. Standards themselves, Mr. Chairman, is a very complex subject. We have people on all the standards committees ourselves. It takes a good deal of time but, as I recall, it took us 2 to 3 years to simply get a standard on how you related the information on tape, which we thought was a rather simple kind of standard but it turned out to be very complex and takes a very long period of time. The capability approach is difficult.
Chairman PROXMIRE. My time is up. I am in a difficult situation. Mr. Caveney would like to make a comment. I have to leave for the
floor and go down for a rollcall vote, Mrs. Griffiths has to leave. If Mr. Brown would like to stay he can, I think, with our enthusiastic support, act as chairman of the committee, so if Mr. Caveney would like to answer then it is your turn, Congressman Brown, and I am going to have to leave and I will read it in the record. Incidentally, I would appreciate it very much if you gentlemen would agree to answer questions in the record from any of us in the event that we have to leave before we are through with questioning.
Representative GRIFFITHS. I want to say I have enjoyed the testimony of all of you here.
I would like to see the Army, which is my favorite, do at least as well as the Navy in purchasing.
Representative BROWN (presiding). Mr. Caveney, did you want to respond to a question ?
USER SHOULD SET THE STANDARD NOT THE SUPPLIER
Mr. CAVENEY. Yes, I would like to make the point here, Senator Proxmire, Mrs. Griffiths, they brought out a very strong point this morning about standards. And Mr. Abersfeller, unknowingly does the same thing, and every one in the industry recognizes the same illness. The peripheral community must abide by what is being marketed by Snow White and the Seven Dwarfs. Now I agree with this committee when it stated the standards will be set by the need of the end user community, not by any one particular company, and that is what I wanted to make very clear here, and Mr. Abersfeller, maybe mentally like we all do, tend to believe Snow White is the standard of the industry.
But they are not, the end user is, as he should be.
The standards should be set by an unbiased disinterested party in Government, with the assistance, as Mrs. Griffiths said this morning, of the computer community at large and the end users. That standard must be set impartially, and we take issue with the fact the peripheral community must immediately embark upon what either Snow White or the Seven Dwarfs determine what is needed.
Representative Brown. If I may pursue that question and then a couple of others.
In the setting of standards, however, where does that expertise come from that develops those standards, if it is not, in fact, from the technology that has been developed by either the large manufacturer or the large consumer?
Mr. CAVENEY. From both, but not alone. The Navy came up with the simplified language library for the Government, which has been since transferred to the computer industry as a standard, and the Goverment has the competency to do these things if they want to as this is proof it can be done. They have more technical in-depth today than probably private industry does except they are scattered, and that is why I maintain, I think DOD could really forge and mold this group at the Bureau of Standards because they have got the talent and by reshuffling their priorities they could come up with a very fine group to do this.
Representative BROWN. Let me just suggest one danger in that, if I may, and get your comment on it. I am inclined to think that when we combine various procurement efforts to meet separate procurement