However, the second report was much better than the first in amount of errors and in amount of time, and the third report coming up now, Mr. Chairman, we believe that the major problems will be under control, although I am sure it will lack perfection.

With this experience as background, the Office of Management and Budget and the General Services Administration, with the cooperation of the using Federal agencies, are introduuing a new concept for validating the recorded inventory information which we plan for the inventory as of June 30, that is the GSA file of June 1969, as updated by reported changes, will be listed and the listing validated by the agencies to reflect June 1970 data that will be available and published this year.

We are using this approach to avoid the yearly reporting coming in from each agency which we think is unnecessarily burdensome, and which we think would add to the timing problem, and by merely sending out this data to the agencies that is already on file and asking them for changes and validation and have it come back we believe this will both minimize the paperwork and the processing and as a result of that enable us to handle it in a minimum of time.

4,666 ADPE SYSTEMS IN FEDERAL INVENTORY

In the prepared statement we talk about the total Federal inventory. We say there were 4,666 automatic data processing equipment systems in the Federal inventory as of June 30, 1969, and almost 3,000 or approximately 62 percent of this total inventory is owned by the Federal Government, and when we testified before your subcommittee in 1967, the Government owned 50 percent of its inventory. So the trend here has been toward less leasing and toward greater purchase.

I won't go into these different categories since that goes in the record, but I would like to point out the distribution of the Federal inventory according to supplier, which I think is interesting.

FEDERAL GOVERNMENT AND NATIONAL CENSUS OF COMPUTERS

This table, which is in my prepared statement for the record, shows the comparison of the Federal Government with the national census of computers that was published by John Diebold, Inc., for the same suppliers, and we believe that this does show, Mr. Chairman, the result of effort on the part of both the Congress, the General Accounting Office, and the agencies, to get a better balance and be less dependent upon one major supplied. (See pp. 38, 57–58.)

This, of course, the problem of getting greater competition in the peripheral area isn't alleviated by this, so I am not suggesting this as indicating that we have that problem under control, because clearly we do not.

EQUIPMENT IN HANDS OF CONTRACTORS

In the prepared statement we talked about equipment in the hands of the contractors, and I merely would like to mention, Mrs. Griffiths, that these categories are included. I don't think my prepared statement is entirely clear. They are included in the inventory, and in the utilization reports and, of course, there are dollar figures that are available on them. There are categories of other kinds of contractors which Mr.

Staats mentioned for which we do not have this kind of information, grantees is probably the best example that I can think of.

PROCUREMENT FROM SMALL PRODUCERS

In the prepared statement, recommendation No. 7 of the subcommittee report states that GSA should make it possible for smaller manufacturers of ADPE to furnish part of the Government's requirements. The statistics that I quoted a few minutes ago on Federal inventory across suppliers, show a more equitable distribution in the Federal Government across the supplier range than exists in the national census. The commentary accompanying the subcommittee recommendations identifies more specifically the intent of the subcommittee in that it indicates "numerous smaller producers of so-called peripheral equipment might well participate to a larger extent in furnishing the Government's requirements directly." And we certainly agree with that.

And there, of course, followed the report of the Comptroller General which has already been discussed.

UNBUNDLING BY IBM

Concurrent with the GAO report, a fundamental change was taking place in the computer industry, or at least a part of it. This change was the announcement by the IBM Corp. that some elements of the "software" programs, which cause the interaction of all peripheral and main computer components and regulate their process in responding to a user's application needs, would be separately priced. Prior to this announcement, these products were included in the price of the equipment. This decision was popularly referred to in the press as “unbundling." With it came some changes in the prices of hardware to accommodate to the increased cost associated with buying the software. The other suppliers did not immediately adopt the IBM practice.

The opportunity to purchase software separately from hardware systems and the existence of a large software industry suggested that softwater and peripheral equipment had much in common from a procurement point of view. In other words, if there were savings possible in the procurement of peripheral hardware units, savings should also be possible in the procurement of software "packages."

The instances cited in the Comptroller General's report dealt only with computer installations which had replaced components after initial selection and it recognized the difficulty of selecting equipment provided by a wide range of suppliers. If potential problems were serious where only hardware was concerned, greater difficulty would certainly be involved in the selection of interacting hardware and software.

KEY CONFERENCE CALLED BY BOB

To consider this technological problem and determine courses of action to be taken. The Bureau of the Budget convened a meeting of key Government people involved in the administration, selection and procurement of automatic data processing equipment on September 1517, 1969. In addition to the Government representatives, the various

facets of the industry concerned (i.e., systems suppliers, software suppliers, and peripheral suppliers) were invited to participate in the discussion, listen to a statement of the problem posed to the Government, and present their ideas for solution of the problem.

CONFERENCE CONCLUSIONS

In the prepared statement we summarized the primary conclusions of this conference.

1. Separate pricing of the various elements of the computer system may ultimately work toward the benefit of the Government and the Government action should therefore be directed toward capitalizing on the benefits obtainable from this trend.

This really, Mr. Chairman, confirms what most of us had believed to be true, but it was a confirmation from groups that are associated with the industry as well as Government people.

2. The Federal Government should retain the use of the "systems integrator" concept for the acquisition of the new systems until the implications of deviating from this method are clearly defined and evaluated.

3. Intensive work should begin now to develop appropriate interface standards looking toward the full implementation in the next generation of equipment.

4. Leased peripheral equipment components and systems now installed should be replaced by components available from independent peripheral manufacturers or from other sources, if it is determined that such components are comparable, compatible, reliable, less expensive and can be adequately maintained.

5. A catalog should be developed which would document, for the benefit of all Federal agencies, information about the hardware devices, software packages and related items that are currently available.

6. There is a need to find ways for reducing both the time and cost involved in the selection and procurement process.

Then I would like to comment on several of these recommendations. The first one, to respond to the recommendation that the Government capitalize on the benefits of separate pricing, the National Bureau of Standards has prepared a proposal for the development of an interface standard which if found upon careful examination to be acceptable and implementable should respond in part to the problem involving the selection process.

The Bureau of Standards can comment on that proposal, and at the end of my testimony I will comment briefly upon the question you have already raised with respect to the adequacy of resources in the Bureau of Standards.

Also, with respect to this same problem area, the General Services Administration will testify on their progress to date on a special procurement test designed to assemble a system on a component rather than a total system basis. We are extremely anxious to see the results of this.

The second recommendation states that the process involving the systems integration concept remain the standard practice and any change in this direction would partly be dependent upon the adequacy of the interface standard and its acceptance by the industry,

and the results of the procurement test which the General Services Administration will discuss.

With regard to the recommendation four on replacement of peripheral components in installed systems, subsequent to the conference, the Veterans Administration, the Navy Department and the Department of the Air Force instituted programs in collaboration with the General Services Administration to replace certain peripheral components of their installed systems.

BOB BULLETIN 70-9

The Bureau of the Budget issued Bulletin 70-9, a copy of which I would like to offer for the record, which required that GSA use the information in the ADP Management Information System, prepare a listing of all leased components for which there were compatible reliable substitutes available at lesser costs to determine where substitutions should be made for cost saving reasons. (See p. 2.)

This action illustrates, as I said I would at the outset of my testimony, where the ADP Management Information System has been used in the handling of a specific decision process. It is through this type of use of an information system that the quality of the system is improved. The user sees the value of providing accurate data, otherwise it is to him just another requirement that is imposed upon him from the Congress or the Bureau of the Budget or the White House. This provides an incentive for him to provide accurate information. The Veterans' Administration procurement has been completed, the Air Force and the Navy procurements are now in process; and I am sure that GSA, when they testify, will include in their report what we can anticipate.

AMENDED BOB CIRCULAR NO. A-11

Another step which we have taken to assure the accuracy of the MIS inventory inputs and the relationship of long-range planning data developed therein to the budget process has been by amending Bureau of the Budget Circular No. A-11, subject: "Preparation and Submission of Annual Budget Estimates" to require the projects and plans represented by the ADPE/MIS to be carried over to the budget process. This should improve the accuracy of the projections used in both processes, and there are some other actions that are in process to improve the quality of the data in the ADP Management Information System.

Mr. Chairman, that covers the points in my prepared statement. (The prepared statement of Mr. Ink follows:)

PREPARED STATEMENT OF DWIGHT A. INK

Mr. Chairman and Members of the Subcommittee; we welcome the opportunity afforded by your June 12, 1970, request to appear and discuss the two areas of ADP management which we have been informed are the subjects of this hearing. These areas are those identified in the Report of the Subcommittee on Economy in Government of the Joint Economic Committee dated April 1968 as:

"Recommendation No. 6. The inventorying of all Government-owned automatic data processing equipment (ADPE), including equipment fur

nished to contractors, should be completde as soon as possible and kept current so as to prevent unneeded future purchases.

"Recommendation No. 7.-GSA should make it possible for smaller manufacturers of ADPE 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 stifling the incentive of smaller manufacturers."

I would like to take each of these items individually first, and then tie the two together subsequently during the course of this testimony.

When Phillip S. Hughes, then Deputy Director of the Bureau of the Budget, testified before this Subcommittee on November 30, 1967, he reported that a new automatic data processing equipment inventory system had been put into effect through the issuance of Bureau of the Budget Circular No. A-83. He likewise reported that initial inputs had been received from agencies and were at that time processed by the General Services Administration. We anticipated problems would be encountered in securing accurate initial information for establishing the basis for a perpetual inventory system. At that time, we underestimated the difficulties which were involved in establishing the perpetual inventory system and the effort and time which would be required to minimize or eliminate errors. We continue to experience difficulties in the accuracy and timeliness of the data inputs. However, the actions we have taken are reducing the size of the problem. With this experience as background, the Office of Management and Budget and the General Services Administration with the cooperation of the using Federal agencies are introducing a new concept for validating the recorded inventory information which we plan for the inventory as of June 30-to be available in published form in September of this year. Even with these difficulties the information system provides a useful base for analyzing the Federal inventory and I would like to provide you with a few statistics with respect to that inventory for your general information. They are:

(a) Total Federal Inventory

There were 4,666 automatic data processing equipment systems in the Federal inventory as of June 30, 1969. 2,910 or approximately 62 percent of this total inventory is owned by the Federal Government. (When we testified before your Subcommittee in 1967, the Government owned 50 percent of its inventory.) 3,039 are used for the general data processing functions, such as inventory control and other logistical functions; laboratory research, engineering and statistical purposes; personnel accounting, payroll and statistics; research; and similar types of applications. The remaining 1,629 are in a special or exempt category because their use is dependent upon the complexity of the environment in which they are employed. These partial exemptions are as follows:

(1) Control Systems Equipment.-EDPE which is an integral part of a total facility or larger complex of equipment and has the primary purpose of controlling, monitoring, analyzing, or measuring a process or other equipment is exempt from EDPE Utilization reporting and Summary ADP Manpower and Cost reporting.

(2) Classified Systems Equipment.-EDPE, the physical location of which is classified, is exempt from EDPE Utilization reporting and Summary ADP Manpower and Cost reporting. In other reporting (ADP Unit Identification) location information which is unclassified should be used.

(3) Mobile Systems Equipment.-Mobile EDPE installations on ships, planes, or vans are exempt from EDPE Utilization reporting only. This exemption includes EDPE installed with military units which are deployed or subject to deployment in areas of active military operations against an enemy force. (b) Distribution of Federal Inventory According to Supplier

The following table shows the distribution of the percentages of the 4,666 ADPE systems in the Federal Government supplied by the principal suppliers and the percentages of the national census of computers published by John Diebold, Inc., for the same suppliers.