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ACQUISITION OF ADP SYSTEMS

FEDERAL GOVERNMENT POLICIES AND PRACTICES

Broad policies and guidelines governing the selection of ADP equipment to be acquired from manufacturers are set forth in Bureau of the Budget Circular No. A-54, dated October 14, 1961, revised by Transmittal Memorandum No. 1 dated June 27, 1967, and Transmittal Memorandum No. 2, dated January 7, 1969. This circular prescribes policies on (a) making selections of equipment to be acquired for use in the ADP programs of the executive branch and (b) making determinations as to whether the ADP equipment to be acquired will be leased, purchased, or leased with an option to purchase.

Also, Public Law 89-306 (Brooks Bill) dated October 30, 1965,
provides exclusive authority to the GSA for procuring all general-
purpose ADP equipment for use by Federal agencies. However, the
law prohibits GSA from exercising responsibilities related to de-
termining ADP equipment requirements, selecting types and con-
Mgurations, and the use to be made of such equipment. Accordingly,
GSA has, limited its involvement in this area to reviews of large
computer procurements and to negotiations for the annual Federal
Supply Schedules.

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Both the Bureau of the Budget and GSA have broad responsibilities relative to the evaluation, selection, and procurement of ADP equipment. In addition, Public Law 89-306 authorizes the Secretary of Commerce (through the National Bureau of Standards) to provide agencies with scientific and technological advisory services relating to automatic data processing and related systems.

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We found that as late as May 1, 1969, none of the three agencies had issued specific guidance for determining the feasibility of substituting peripheral equipment from independent manufacturers into systems manufacturers' computer systems. Some actions have been taken, however, which reduce the obstacles that have made such procurements difficult. These actions include adopting as mandatory Federal standards, industry standards concerning character code, magnetic tape, and paper tape. These Federal standards, and others under consideration, will increase compatibility and thereby reduce the technical difficulties in considering procurement of components from sources other than the systems manufacturers.

As mentioned above, steps that the central offices of the executive agencies have taken toward implementation of Federal standards and the work under way in validating certain software to ensure their compliance with basic specifications are additional prerequisites to overcoming exdsting incompatibility. Although the executive agencies are

moving in the direction of enforcing for Federal use those standards adopted by the United States of America Standards Institute, greater support by the computer suppliers in using such standards in the design of their hardware and software would greatly accelerate the elimination or minimization of incompatibility.

We did note that GSA in its Federal Property Management Regulations amendment E-56, dated January 17, 1969, stated that:

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"Nothing in this section 101-32.407 is intended to preclude
or otherwise detract from the procurement of the several com-
ponents, including peripheral equipment, of a system, or
augmenting an existing system, from a number of different
sources, if such action will be in the best interests of the
Government. Suitable equipment not on a Federal Supply
Schedule contract, as wel as that which is on such a con-
tract, must be considered."

PROCUREMENT OF COMPLETE SYSTEMS VS, INDIVIDUAL COMPONENTS

The acquisition of an ADP system is usually a major expenditure for an organization. Therefore, the prospective user must carefully weigh all the factors which could have either a direct or an indirect influence on the determination of which system meets his requirements at the lowest overall cost. The difficulty faced by the user in accurately assessing the merits of various systems offered by competitive manufacturers is compounded by many intangible factors, such as, equipment reliability, availability, competence of the manufacturer's support personnel, software performance, and programming complexdty among others.

A computer system is made up of a complex combination of various pieces of electronic and electromechanical equipment designed to function as a whole. Each individual component of a computer system is not functional until it is joined to other components and until the proper software is introduced into the system to make it perform. For this reason, some Federal agencies utilize benchmark tests to determine whether a manufacturer's system is capable of fulfilling the system specifications, These benchmark tests consist of representative problems, the solution of which, the system manufacturer is required to demonstrate and run on his proposed equipment configuration within a stipulated time period.

Both the Federal Government and private industry in general follow the practice of relying on a computer system manufacturer to assemble a series of components into a workable system. This method imposes upon the system manufacturer the burden of having to plan for and perform the necessary interfaces and of developing an operative software

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a surface forming a common boundary between two systems or two devices.

Interface

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system. Of course, the computer system manufacturer is compensated for this effort and offers the end user a complete system with the following advantages:

--A fully integrated and operational system.

--An available, effective and operative software system.

--Educational services for training operating personnel.

--A maintenance service for the entire system.

--Expertise and support personnel to assist in initial

installation and implementation.

--Back-up-equipment support for initial testing and

emergency situations.

The price of computer equipment obtained from a system manufacturer necessarily includes the cost of many of the services described above. On the other hand, independent manufacturers of components do not normally provide these services, specializing instead in the marketing of a particular component or group of components at lower prices. We believe that more and more situations arise when some users do not require all of the support services made available by the system manufacturer. To alleviate the inequity of having these users pay for services not required, it would be necessary for the industry to develop a separate pricing structure for each and every service that is provided. Certain industry sources are promoting such a change in the pricing structure and, if this situation develops, savings now obtainable by procuring components from other than computer system manufacturers might be reduced.

The state of the art today is such that, in selecting a computer, one cannot randomly select various components from various manufacturers with any assurance that, when all this equipment 18 put together, it will operate as a system. In this regard, once the equipment has been obtained, electronic interface must be accomplished and then the necessary software system must be developed either in-house or by contract with an outside Mrm. Although this concept of purchasing components from various manufacturers is a complex one, it is generally recognized in the industry that, by so doing, the sophisticated user can obtain at a savings the best available equipment for a particular application.

The recent efforts made by independent peripheral manufacturers to market their equipment directly to the end users of computer systems should generate added competition within the industry and should result in greater exposure of such equipment to the end users. Greater ramtli. arity with what is being offered will make it possible for end users to

consider for procurement a greater variety of components. However, if the Government users are to benefit from this added competition, they must reappraise their procurement practices and make provisions for soliciting and evaluating components offered by these manufacturers, We have found that the general practice in the past has been to deal exclusively with systems manufacturers. Consideration was given to independent peripheral manufacturers only in those situations where special purpose equipment was required or in other very unusual situations.

We recognize that limiting the computer procurement process to systems manufacturers is the most expedient method of procurement; however, such a method does not recognize the possibility of obtaining increased competition for certain components nor of achieving the potential benefit to be derived from use of another manufacturer's components. We also recognize that to expand procurements to include every conceivable manufacturer in the industry would be impracticable under the present selection system because of the infinite variety of components that might be proposed to fill the Government's requirements. We do believe, however, that procurement procedures should be established to give more consideration to independent peripheral manufacturers' components.

It is apparent that, at the present time, the Government users must place a great deal of reliance on the computer systems manufacturers. However, we believe that Government agencies can and should develop the necessary technical expertise required to conduct a marriage of various computer components. This expertise, we believe, can be developed gradually if agency officials give consideration to the following procedures in procuring computer components from sources other than computer systems manufacturers :

--To replace or add a component to an installed system

--To replace a component being procured as part of a

total system with one available from another source

--To assemble components into an integrated computer

system

The most complex method of computer procurement is when each component of a system is procured on an individual basis and when the necessary system engineering and the necessary software operating system are to be developed in-house or are to be contracted for. Recognizing that such a sophisticated manner of procurement may not be practical at the present time, we believe that considerable savings could result if:

(1) for existing computer installations, consideration were

to be given to the procurement of additional or replace-
ment components either from the original equipment manu-
facturer or a supplier of components that are equivalent
to and can directly replace (are plug-to-plug compatible)

components offered by the system manufacturer or
(2) after having selected a system manufacturer's computer for

procurement, an effort is made to determine if selected
components could be obtained from an alternative source.
of course, in each case, the component manufacturer would
have to demonstrate that his component offers financial
savings and can be interfaced with the computer manu-
facturer's system with no resulting degradation in system
operation or major effect on previously run benchmark
tests or evaluations.

Although the above procedures are concerned primarily with the procurement of a new system and the addition to or replacement of an individual component, we believe that data processing managers in general should be alert to the marketing of new products by manufacturers of peripheral equipment who can easily replace, at a savings, a system manufacturer's components. Such an example would include the abovedescribed plug-to-plug compatible components which are generally sold or leased at a lower cost than the system manufacturer's components and do not result in any interface or software problems.

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