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STUDY OF THE

ACQUISITION OF PERIPHERAL EQUIPMENT

FOR USE WITH

AUTOMATIC DATA PROCESSING SYSTEMS

INTRODUCTION

The General Accounting Office has examined into the acquisition by Federal agencies of peripherall equipment for use with automatic data processing systems. Our review was concerned primarily with (1) the feasibility of the Federal Government's procuring such equipment from sources other than the manufacturer of the ADP system, (2) the advantages of such procurement, and (3) the considerations required in making such acquisitions.

During our review, we examined into:

--The policies established by the Bureau of the Budget and

the General Services Administration regarding the selection and procurement of ADP equipment.

--Activities of GSA in the procurement of ADP equipment under

Public Law 89-306, an act which provides for the economic
and efficient purchase, lease, maintenance, operation, and
utilization of automatic data processing equipment by
Federal departments and agencies.

--The marketing of peripheral equipment by the computer industry.

--The policies and practices of Federal agencies and commercial

organizations relative to the selection and procurement of
ADP systems and components.

--The savings available to the Govern ir certain components

were to be obtained from sources other than the manufacturer of the ADP system.

--The factors affecting decisions concerning the acquisition

of peripheral equipment.

Various units or machines that are used in combination or conjunction with the main frame of computer systems, such as magnetic drums, magnetic tape units, printers, storage units, etc.

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During our study, we reviewed our conclusions and recommendations with officials of the Bureau of the Budget, the General Services Administration, and the National Bureau of Standards and their views were considered in the final preparation of this report.

CONGRESSIONAL INTEREST

During November and December 1967, the Subcommittee on Economy in Government of the Joint Economic Committee held hearings and obtained testimony relating to the procurement of ADP equipment. Specifically, the Subcommittee was especially concerned that Government procurement practices had tended to favor larger manufacturers of ADP equipment, thus stirling competition from smaller companies. In addition, testimony before the Subcommittee indicated that the numerous smaller producers of peripheral equipment might well participate to a larger extent in furnishing the Government's requirements directly.

In a report? entitled "Economy in Government Procurement and Property Management," dated April 23, 1968, the Subcommittee stated that:

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"The General Services Administration should make it possible for smaller manufacturers of ADP equipment to furnish part of the Government's requirements. Specifications should not be designed around the products of certain companies which have the effects of eliminating competition and stilling the incentive of smaller manufacturers.

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Subsequent to the hearings, the Chairman of the Subcommittee requested that we examine into the financial advantages of procuring peripheral equipment directly from peripheral or component manufacturers. In our reply to the Subcommittee, dated September 19, 1968 (see app. II), we pointed out that, under certain circumstances, savings might be available to the Government through the procurement of selected ADP components from peripheral manufacturers and suggested the need to adequately consider all the potential technical implications.

We also advised the Subcommittee that we were preparing a more complete report to the Congress on this subject. One purpose of our more complete report is to inform the Congress and all Federal agencies of the opportunities for obtaining such savings and other available benefits in acquiring computer components from sources other than the ADP systems manufacturers.

Report of the Subcommittee on Economy in Government of the Joint
Economic Committee, 90th Congress, 20 Session, Congress of the
United States.

GROWTH OF THE COMPUTER INDUSTRY

1

Although a few experimental computers were assembled during the late 1940s, the general-purpose digital computer did not have its beginning until the early 1950s. Since that time, the growth of the computer industry has been tremendous. By 1955, some 400 computers had been installed in the United States. By 1960, the number of installations approximated 6,000, and, by the end of 1968, the number of computer installations exceeded 67,000. The computer hardware market is believed to have reached a value of about $7.2 billion during 1968 and is expected to grow at a 15 to 20 percent annual rate over the next 5 years.

The computer industry is generally dominated by the computer systems manufacturers whose marketing efforts are devoted to providing complete computer systems along with the necessary technical assistance required to properly utilize the system.

Recently, however, numerous independent manufacturers of peripheral equipment have made a concentrated effort to compete with the systems manufacturers and offer selected items of peripheral equipment for computer systems directly to the user market. These manufacturers generally restrict their marketing efforts to a single product or to individual items of peripheral equipment and concentrate on providing individual equipment components at a lower price than offered by the systems manufacturers.

GROWTH IN USE OF COMPUTERS IN THE FEDERAL GOVERNMENT,

In the past several years, there has been very substantial growth in the use by the Federal Government of ADP equipment. The Federal Government now spends about $2 billion annually for the purchase, lease, and operation of ADP equipment. The following statistics accumulated and reported by the Bureau of the budget and GSA show this growth in the Federal Government's use of computers":

These statistics exclude most contractor-operated equipment and equipment used in military tactical and intelligence operations.

At June 30

Number of systems

1962
1963
1964
1965
1966
1967
1968
1969 (estimate)

1,030 1,326 1,862 2,412 3,007 3,692 4,232 4,620

Notes: Data subsequent to 1966 is based on the new "ADP Manage

ment Information System" administered by the GSA.

Excluded from the above totals are analog computers and computers which are built or modified to special Government design specifications and are integral to weapons systems.

Data on contractor-operated equipment is excluded unless
the equipment is operated in the performance of work under
cost-reimbursement-type contracts and subcontracts when
(1) the equipment is furnished by the Government or
(2) the equipment is installed in Government owned, con-
tractor-operated facilities.

ELEMENTS OF A COMPUTER SYSTEM

A computer system, sometimes referred to as an ADP system, consists of a machine or a group of automatically intercommunicating machine units capable of entering, receiving, storing, classifying, computing, and/or recording data, and includes at least one central processing unit, one or more storage facilities, and various units of input and output equipment. Those units of the computer systems that are defined as input or output devices or as external information storage devices are referred to as peripheral equipment.

Computer hardware includes all the physical components used in a computer system. Computer software includes the programs necessary to make the computer hardware operative. Computer support includes all manpower and other assistance necessary to make and keep the computer hardware and software operative.

In terms of hardware, a typical computer configuration might consist of a central processing unit and the following pieces of peripheral equipment;

IList does not include all types of peripheral equipment .

--Disk storage drive

A storage device that magnetically records on flat rotating disks.

--Magnetic tape unit (See P. 16 for photograph.)

Handles magnetic tape. It usually consists of a tape transport, reading or sensing and writing or recording heads and associated electrical and electronic equipment.

--Card read/punch.

Punches holes in cards at designated locations to store
data. The device is also capable of sensing and translating
the holes in punched cards for internal storage of data.

--Printer.

Spells out computer results as numbers, words, or symbols.

--Plotter.

Inscribes visually a dependent variable.

--Communication devices.

Transfers information from one point, person, or device
to another.

--Character readers.

Scans documents to identify characters.

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