NEED TO CONSIDER MORE ECONOMICAL

SOURCES OF SUPPLY FOR COMPONENTS

Procurement of equivalent plug-to-plug

compatible components

Savings available by using plug-to-plug compatible components

Government-wide benefits immediately available

Tape drives

Disk drives

Third-party leasing arrangements

Technical characteristics

Recommendation

Procurement of components that are

not plug-to-plug compatible

from the original manufacturer Procurement of components from alternate sources of supply Potential savings available by using components that are not plug-to-plug compatible Recommendation

Competitive procurement of magnetic disk packs

45 6 67

96

10

NEED FOR DEVELOPMENT OF STANDARD INTERFACE

29

Recommendations

Page

FACTORS TO BE CONSIDERED IN MAKING PROCUREMENT DECISIONS
Operational capability of equipment

31

31

Need for electronic or software interface

32

Maintenance responsibility and availability
Alternatives for maintenance

Maintenance problems anticipated by Government managers
Advantages of in-house maintenance

Contract terms

32

2344555

34

35

35

32 33

34

COMPTROLLER GENERAL'S
REPORT TO THE CONGRESS

STUDY OF THE ACQUISITION

OF PERIPHERAL EQUIPMENT
FOR USE WITH AUTOMATIC DATA
PROCESSING SYSTEMS
B-115369

DIGEST

WHY THE REVIEW WAS MADE

The General Accounting Office (GAO) performed this study because of:

--Preliminary indications that significant savings

could be achieved in the procurement of selected
computer components.

--The increasing investment of the Federal Government
in automatic data processing (ADP) equipment.

--The widespread congressional interest in the procurement,
management, and use of such equipment.

FINDINGS AND CONCLUSIONS

Recently, numerous independent manufacturers of peripheral
equipment--magnetic tape units, disk storage drives, etc.--
have made a concentrated effort to compete with the systems
manufacturers and to offer selected items of equipment
directly to users.

The study shows that it is common practice for Government
ADP managers to obtain all required ADP equipment from
computer systems manufacturers even though certain items
of equipment can be procured more economically from the
original manufacturers or from alternate sources of supply.

GAO identified selected computer components that are directly
interchangeable (plug-to-plug compatible) with certain other
systems manufacturers' components and are available at
substantial savings.

GAO found that a number of private organizations had installed
available equipment of plug-to-plug compatibility and had
achieved substantial savings. Yet it found only a few instances
where Federal agencies had availed themselves of this economical
means of acquiring computer components. Central agency leadership

could provide impetus which would achieve similar savings in
the Federal Government. (The General Services Administration
(GSA) has recently started a test to determine the possibilities
of achieving savings by using equipment of plug-to-plug com-
patibility.)

On the basis of observations at commercial organizations visited
during the study, GAO believes that the acquisition of plug-to-
plug compatible components for ADP systems, either in operation
or on order, provides an opportunity for Federal agencies to
achieve significant savings in costs, an objective which is in
line with the President's program of cost reduction in the Federal
Government.

GAO believes that, if more systematic attention is given to
acquiring non-plug-to-plug components by the executive branch
of the Federal Government, significant savings also can be
achieved.

GAO estimates that, if plug-to-plug compatible components were
used to replace similar components rented by the Government,
annual savings would be at least $5 million. If such components
were to be purchased, savings would exceed $23 million.
P. 19.)

(See

GAO believes that, in addition to the estimated savings in acquiring plug-to-plug compatible components, savings are also available in the acquisition of non-plug-to-plug components from sources other than the systems manufacturers.

It is estimated that the purchase cost of such components, now
being leased for about $50 million, from the systems manufacturers
would be about $250 million; whereas the acquisition price for
similar components from an alternative source of supply probably
would be about $150 million, a difference of about $100 million.
(See p. 27.)

GAO suggests, however, that the potential savings must be evaluated in light of costs associated with combining the components into a total computer system.

RECOMMENDATIONS OR SUGGESTIONS

GAO recommends that the head of each Federal agency take immediate action to implement steps requiring replacement of leased components that can be replaced with more economical plug-to-plug compatible units.

GAO recommends also that the Director, Bureau of the Budget,
and the Administrator of General Services provide more specific
guidelines for the evaluation and selection of plug-to-plug
compatible equipment and for other components.

GAO recommends that, pending the issuance of specific policies, the factors described in this report be used by Federal agencies to evaluate alternate sources of ADP equipment.

Also, inasmuch as third-party leasing arrangements generally result in savings when compared with rental arrangements available from equipment manufacturers, GAO believes that the head of each Federal agency should consider this method of procurement when purchase of the equipment is determined not to be advantageous.

AGENCY ACTIONS AND UNRESOLVED ISSUES

The use of plug-to-plug compatible components for Federal ADP
equipment is currently being studied by the General Services
Administration. Present plans call for GSA to study also the
acquisition of other components and peripheral equipment from
alternate sources at a later date. GAO believes the GSA study
to be important and that it should be accelerated to provide a
basis for promulgating more specific policies for the guidance of
Federal agencies in obtaining ADP components from the most eco-
nomical source of supply.

MATTERS FOR CONSIDERATION BY THE CONGRESS

This report summarizes the findings of the study and is issued
to inform the Congress and the head of each Federal agency of
the opportunities for obtaining savings when acquiring computer
components from sources other than the ADP systems manufacturers.