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In view of the above, the rental and purchase prices of plug-toplug compatible components can be effectively compared with the prices of the components which they can replace. During our review, we examined into the pricing of plug-to-plug compatible tape drives which were readily available from more than one market source.

Government-wide benefits immediately available

We estimate that annual savings of at least $5 million could be realized if selected models of tape drives and disk storage drives being used by the Federal Government were to be rented from independent manufacturers of peripheral equipment rather than from the systems manufacturers. If these same tape drives and disk drives were to be purchased rather than rented from manufacturers of independent peripheral equipment rather than the systems manufacturers, we estimate possible savings of about $23.5 million.

Our estimates of savings are based on information contained in the GSA inventory of computer equipment for the fiscal year 1968 and on the following factors:

--A total of 1,733 tape drives and 459 disk drives being
rented by Government agencies and representing models
currently available from independent peripheral manu-
facturers marketing plug-to-plug compatible replacements.

--The systems manufacturers' fiscal year 1969 Federal
Supply Schedule price lists and the independent
manufacturers' published price lists. Quantity discounts,
which are published by the independent peripheral manu-
facturers, are not reflected in our estimates.

--Assumed one-shift-a-day usage. The system manufacturer
has an extra-use charge for more than 176 hours of
usage a month and the independent manufacturers generally
provide unlimited use for the basic monthly charge.

We have found as further illustration of the potential impact on Government ADP expenditures that selected tape and disk storage drives, which are now owned by the Federal Government and which represent an investment of about $57 million, are of a type and model that are available for purchase from independent peripheral manufacturers of equipment for about $31 million, a difference of $26 million.

In view of the potential impact which this form of procurement could have on ADP expenditures, we strongly urge agency officials to immediately consider the use of plug-to-plug compatible tape and disk storage drives. If it should be determined that it would be advantageous to purchase such components, we believe that competitive bulk procurement by GSA would be most advantageous to the Government.

We believe also that efforts should be made by agency officials to investigate the availability from independent peripheral manufacturers of components other than tape and disk storage drives which might be available at similar savings.

Tape drives

The Government generally obtains from the computer system manufacturer a number of tape drives for each computer system installation.

Because the largest computer system manufacturer has the most tape drives already installed, independent manufacturers devoted their early efforts to the development and marketing of a plug-to-plug compatible replacement for this manufacturer's tape drives.

During our review, we identified at least three alternate sources for tape drives which can be directly interchanged with the system manufacturer's component. The following comparison of purchase prices shows that plug-to-plug compatible tape drives are available from alternate sources at savings of 17 to 58 percent as compared to the system manufacturer's purchase price.

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In the above schedule, the model 5 tape drive represents the greatest opportunity for savings.

The prices shown above for the alternate sources are for the purchase of one unit. If the user purchases more than one unit, quantity discounts of from 2 to 16 percent are available depending on the quantity ordered. One alternate source offers different quantity discounts for each model. The system manufacturer's prices which were taken from the fiscal year 1969 Federal Supply Schedule are also unit prices; however, the supply schedule does not provide for quantity discounts.

We have been advised by plug-to-plug compatible tape drive manufacturers that they have the capability to upgrade, at a nominal charge, a tape-drive model used with second-generation equipment to the model configuration needed for use with third-generation equipment.

In addition to the savings available in purchase prices, the following schedule shows savings of 9 to 26 percent in monthly rental prices.

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As previously noted, model 5 offers the greatest potential for savings because it has the largest price variance and is the most commonly used replaceable tape drive in the Government.

The above monthly rental rates of the system manufacturer are from the fiscal year 1969 Federal Supply Schedule which allows the Government a maximum of 176 hours of usage per month. Additional usage in excess of 176 hours per month is charged at 30 percent of the basic monthly rate for models 1 through 5 and at 10 percent for the remaining models. The alternate sources of plug-to-plug compatible tape drives offer unlimited monthly use of their equipment with the exception of source "B" which charges 10 percent of the basic rate for use in excess of 176 hours per month on models 6 through 11.

With respect to maintenance costs, we found that the independent manufacturers of peripheral equipment offer maintenance plans which are comparable to those of the systems manufacturers and, when the equipment is purchased, maintenance plans are available at a slightly lower price.

Disk drives

Another item of peripheral equipment which the independent manufacturers have recently begun to market is a plug-to-plug compatible

disk drive. This item of equipment can also be used to directly replace, at a savings, the disk drive used by a major system manufacturer. As shown below, we identified three alternate sources of supply which offer savings of 20 to 29 percent in purchase prices and of 16 to 24 percent in rental costs. Comparable maintenance plans are also available at a savings.

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In this comparison, the system manufacturer's purchase price and monthly rental rate were obtained from the fiscal year 1969 Federal Supply Schedule. As noted previously, the system manufacturer's monthly rental rate is for 176 hours of use. Additional monthly use is charged at 10 percent of the basic monthly rate. All of the above plugto-plug compatible disk drive suppliers provide unlimited monthly use of their equipment.

Third-party leasing arrangements

In addition to the savings available by the leasing of plug-to-plug equipment from peripheral equipment manufacturers, we found that savings in rentals are available from third-party leasing firms. As shown in the appendix (see pp. 41 and 43), two of the commercial firms visited used third-party leasing arrangements for obtaining plug-to-plug compatible equipment. Because third-party leasing arrangements generally result in savings when compared to rental arrangements available from equipment manufacturers, we recommend that the head of each Federal agency consider this method of procurement when purchase of the equipment is determined not to be advantageous.

Technical characteristics

Although we did not make a technical evaluation of the plug-toplug compatible equipment marketed by the independent manufacturers of peripheral equipment, we did determine that the technical specifications of their equipment generally equaled or exceeded those of the system manufacturer. In addition, the users which we visited generally indicated that the technical operation of the equipment met their requirements.

Recommendation

In view of the significant savings available from the purchase or lease of plug-to-plug compatible components and the ease with which such equipment can be installed, we recommend that the Director, Bureau of the Budget, and the Administrator of General Services issue more

specific central policy guidance and take the necessary steps to require that all agency heads give consideration to the feasibility of using such equipment.

In the meantime, we recommend that the head of each Federal agency require managers of their data processing installations to consider the use of plug-to-plug compatible peripheral components. We believe that such action should be taken not only in the case of computer systems already installed but also in those instances where systems are being evaluated and selected for procurement.

PROCUREMENT OF COMPONENTS THAT ARE NOT PLUG-TO-PLUG
COMPATIBLE FROM THE ORIGINAL MANUFACTURER

Some computer systems manufacturers approach self-sufficiency while others are dependent on peripheral manufacturers to provide certain components. In some instances, the computer system manufacturer may rely on the manufacturer of peripheral equipment to provide the complete component which is to be included in his computer system. In other instances, the system manufacturer might purchase only selected or critical parts of a component and then complete the fabrication of the component.

We believe that there is a potential for the Government to obtain significant savings through the purchase of certain computer components direct from the original manufacturer. The following example demonstrates the type of savings possible when aggressive managers adequately evaluate the various sources of supply for computer components. Although the example may be somewhat unique, we believe that it illustrates the need to recognize and consider the savings possible through direct procurement.

When the United States Fleet Numerical Weather Facility at Monterey, California, required additional storage capacity for its computers, a determination was made that such equipment could be obtained, at a savings, directly from the original manufacturer of the equipment rather than through the computer system manufacturer. Therefore, the facility in 1966 and 1967 made two negotiated procurements of drum-storage devices and related controllers from the actual manufacturer of the equipment. Equivalent equipment from the computer system manufacturer would have cost an additional $475,200, as follows:

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