1. Systems specifications.-These specifications are developed independently of any particular manufacturer's equipment and are designed to insure full and free competition among qualified manufacturers.

2. Request for Proposal (RFP) and Selection Plan.-All interested vendors are formally invited to submit proposals. A comprehensive description of selection criteria is established. Factors which will affect the selection are made known to all vendors.

3. Proposal evaluation.-This is a combination of technical evaluation and cost analysis. Representative computer programs are run to determine the capability of the proposed equipment to fulfill the specifications, and life cycle costs of the system are computed. Negotiations are conducted with all qualified vendors and final contract terms agreed upon.

4. Contract award. The lowest cost bidder who qualifies technically is awarded the contract.

PROCUREMENT OF PERIPHERAL EQUIPMENT

In line with this subcommittee's recommendations concerning the substitution of independently produced compatible peripherals for presently installed equipment, I would like to discuss with you what we have done in this area.

In late 1968 a task group of our DOD ADP policy committee examined the possibilities for carrying out such a program in DOD. In October 1969 we asked the senior ADP policy officials of the defense components to give personal attention to the development and progress of programs designed to: (1) give independent peripherals manufacturers (and other qualified sources) fully competitive consideration when replacing or augmenting peripherals components, and (2) replace installed leased punch card machine equipment and peripherals on a bulk basis where such a replacement would reduce costs.

In response to our direction, the Air Force, Navy and Defense Supply Agency initiated requests for proposals for the competitive replacement of plug-to-plug compatible periherals and they have been issued. Relacement of additional peripherals for the Army and other DOD components will be accomplished as part of the government-wide GSA procurement.

The Bureau of the Budget, as a follow-up to the conference at the Federal executive center at Charlottesville in October 1969, issued their Bulletin No. 70-9, dated February 2, 1970. This bulletin required Federal agencies to review and make certain determinations regarding the replacement of installed peripheral equipment with more economical equipment produced by independent peripheral manufacturers. This was implemented in the DOD on March 3, 1970, to cover peripherals for which competitive replacement action had not already been initiated by DOD components.

A complete list of all peripheral equipment in the Department of Defense was prepared by the GSA from the ADPE inventory requires by BOB Circular A-83 and distributed by office to the services and defense agencies. Each piece of equipment was identified by them as either being available for substitution or not, and if not, why not. The annotated list was returned to GSA, to provide them with planning data for their bulk procurement action.

As I previously mentioned, actions have been undertaken by Defense components to substitute significant amounts of independently produced peripherals for that presently installed. I would like to discuss some of the more important actions with you.

NAVY

The Navy and Marine Corps have completed action on one replacement procurement, are nearing completion on a second, and are in the midst of competition for a large general buy.

The Army has collected requirements for replacement of 80 installed tape drives and disc drives and forwarded these to GSA for inclusion in the GSA competition.

AIR FORCE

An RFP was released June 10, 1970, calling for the replacement of approximately 150 IBM 729 (second-generation) tape drives, currently installed at various Air Force locations in the United States. The Defense Communications Agency has identified requirements for seven devices, to be included in the GSA multidepartmental buy.

IN SUMMARY

A total of 1,227 tape and disc drives will be competitively selected for DOD as a result of DOD and GSA actions now complete, underway, or to be initiated within 60-90 days. We estimate that these actions will result in savings of at least $4.4 million per year. They are summarized in table 1 of the prepared statement.

From these examples, it is apparent that DOD is vigorously pursuing a peripheral replacement program, which has and will result in immediate and substantial savings to the Government. Experience with installed compatible equipment is generally favorable, and ADP management officials throughout the Department of Defense recognize the benefits and opportunities of competition in this area.

An important topic that may be of interest to this subcommittee relates to the initial procurement of a computer system with components which come from different manufacturers. Such an approach would be an extension of the concept of procuring independently produced peripherals to replace installed equipment but it presents a number of technical problems regarding system integration and system maintenance. The GSA has issued a request for proposal for a computer system which may be made up of equipment from different manufacturers. We expect that the experience gained in that procurement will be directly useful to DOD, and we are following it with great interest.

Now I would like to turn to the ADP inventory. The Department of Defense maintains an inventory of automatic data processing equipment as required by Bureau of Budget Circular A-83. The inventory includes ADPE used by Government contractors when one of the following conditions obtain: (1) the equipment is leased and the total cost of the lease is reimbursed under one or more reimbursement-type contracts, or (2) the equipment is purchased by the contractor for the account of the Government or where title will pass to the Government,

or (3) the Government furnishes the equipment to the contractor, or (4) the equipment is installed in Government, contractor-operated facilities. Responsibility for reporting contractor used or operated equipment rests with the military department or defense agency responsible for administering the contract.

180 CONTRACTOR-OPERATED COMPUTER SYSTEMS IN DOD INVENTORY

6/30/69

As of June 30, 1969, 180 compuuter systems were reported in the DOD inventory of ADPE as being operated by Department of Defense contractors in Government and contractor facilities. 92 of these systems were furnished by the Government and 88 were provided by the contractors.

The value of this equipment, as measured by the manufacturers' purchase price, is $134 million. The value of the Government-furnished equipment is approximately $61 million. Detailed data regarding ADPE operated by contractors are shown as table 2 in the prepared

statement.

CONTRACTOR PROCUREMENT OF ADPE

There are two provisions within the Armed Services Procurement Regulations that warrant mentioning. First, before a contractor is permitted to acquire ADPE for the account of the Government, the requirement must be submitted to the Defense Supply Agency where it is screened against reported ADPE excesses to determine whether the requirement can be satisfied from already available ADPE_resources. Only when the requirement cannot be so satisfied and the Defense Supply Agency has formally certified to this fact, is the contractor permitted to acquire new ADPE.

REPORTS OF EXCESS ADPE BY CONTRACTORS

Second, at the point when ADPE which the Government owns or has fully vested rights in is no longer needed to perform the contract, the contractor is required to submit a report of excess personal property to the Defense Supply Agency where it is made available to other DØD and Government agencies through the ADPE reutilization

program.

REUTILIZATION OF EXCESS ADPE BY CONTRACTORS

The increasing success of contractor use of the ADPE reutilization program is attested by the fact that contractors have acquired $22 million of ADPE through this source to meet approved requirements during the first 11 months of fiscal year 1970 compared to $9 million in all of fiscal year 1969. In addition, the amount of ADPE reported by contractors as being available for DOD and Government-wide reutilization increased from $32 million in fiscal year 1969 to $67 million in fiscal year 1970.

That ends my summarized statement.

(The prepared statement of Colonel Warren follows:)

PREPARED STATEMENT OF COL. JOSEPH B. WARREN

Mr. Chairman and Members of the Subcommittee, I am Colonel Joseph B. Warren, USAF, Deputy Comptroller for Data Automation, Office of the Secretary

of Defense. I will present a summary of ADP management in the Department of Defense and address automatic data processing procurement practices of the Department of Defense, especially as they relate to free and full competition, procurement of peripheral equipment and inventory practices in respect to contractor-held automatic data processing equipment.

I have with me my principal assistants, Commander Jan S. Prokop, USN, Assistant Deputy Comptroller, Mr. Robert A. Raup, Director for Automation Policy, and Mr. Henry Lichstein, Director for Advanced Computer Techniques. This Subcommittee's interest in the use and management of automatic data processing equipment (ADPE) within the Department of Defense was reflected in the Subcommittee Report of April 1968. My own concern and interest in this subject closely parallel that of the Committee members. Since the April 1968 Hearings, a number of significant and strong management actions have taken place within the DoD and the results have been reflected in our management reports and statistics. I would like to discuss the most important of these actions and the results in recognition of your concern in this area.

The June 1968 establishment of an ADP Policy Officer for the DoD-wide ADP functions resulted in the creation of the office of Deputy Comptroller for Data Automation, at which time I assumed my present responsibilities. This office has been staffed with experienced professionals in ADP matters and serves to advise the Secretary on policy and technical considerations. One of the principal motives in the establishment of this office was to provide a dispassionate, technically competent staff which would be the advocate of no system, and which could provide advice on ADP policy to be applied evenly in all functional areas.

This office is not an operational unit. It does not operate automated data systems or procure automated data processing equipment (ADPE). The office develops policies which are implemented by the Military Departments and the Agencies of the DoD. These policies concern the selection, acquisition, utilization and management of automatic data processing equipment and associated computer programs throughout the DoD. Other responsibilities of the office include the monitorship of DoD patricipation in programs for Governmentwide sharing and reutilization of ADPE, the administration of the DoD Data Standardization Program, and the review of major DoD automated data systems. The development of large automated data systems is closely monitored by the OSD and DoD Component review offices. My office has been active in the onsite review of a number of automated data systems in the past year. During calendar year 1969, we visited and reviewed twelve major systems on-site. These reviews were conducted in full cooperation with the responsible functional manager and have resulted in major decisions concerning the design, development and implementation of these systems. So far this year, we have reviewed twenty major DoD automated data systems.

The process of systems review and cost-effective justification has been in effect for some time in the DoD. However, recent emphasis has been given to this review and evaluation procedure. On February 6, 1970, the Deputy Secretary of Defense, Mr. Packard, signed a memorandum which effectively stopped expansion or implementation of all automated data systems until the planning, cost-effectiveness and the system review plans were evaluated, documented and specific Agency level approval for continuance or expansion had been obtained. My office is responsible for monitoring these reviews. When these reviews of automated data systems are completed, each significant system which is undergoing development or expansion will have either explicit documented approval for continuance or will be given instructions on deficiencies to be corrected prior to approval. This action constitutes a major milestone in our program to improve manageemnt of ADP systems in the DoD.

In line with the stronger policy role in the OSD which has evolved, there have been corresponding changes, where necessary, in the Services' and Agencies' ADP organizations. The central approval and selection of ADPE within the Services and Agencies has been strengthened and improved.

I would like to review briefly the steps in the ADPE procurement process in the DoD. As you know, while GSA is charged with the procurement of all ADPE in the Government, the separate Departments are responsible for determination of their requirements. The determination of requirements includes selection of ADPE. The selection process and the procurement process are closely intertwined and the DoD and GSA act as a team in carrying out the selection and procurement of ADPE. In some cases GSA may elect to delegate the procurement authority to the DoD Component. When GSA retains procurement authority, a team is formed with representatives from the DoD Component se

lection offices and the GSA, and all actions are closely coordinated in accordance with mutually agreed upon procedures. In either case, the DoD Component selection offices are intimately involved in each of these major steps of the selection process:

1. Systems specifications.-These specifications are developed independently of any particular manufacturer's equipment and are designed to insure full and free competition among qualified manufacturers.

2. Request for Proposal (RFP) and Selection Plan.-All interested vendors are formally invited to submit proposals. A comprehensive description of selection criteria is established. Factors which will affect the selection are made known to the vendors.

3. Proposal evaluation.-This is a combination of technical evaluation and cost analysis. Representative computer programs are run to determine the capability of the proposed equipment to fulfill the specifications, and life cycle costs of the system are computed. Negotiations are conducted with all qualified vendors and final contract terms agreed upon.

4. Contract award. The lowest cost bidder who qualifies technically is awarded the contract.

In line with this Subcommittee's recommendations concerning the substitution of independently produced compatible peripherals for presently installed equipment, I would like to discuss with you what we have done in this area.

In late 1968 a Task Group of our DOD ADP Policy Committee examined the possibilities for carrying out such a program in DOD. In October 1969 we asked the Senior ADP Policy Officials of the Defense Components to give personal attention to the development and progress of programs designed to: (1) give independent peripherals manufacturers (and other qualified sources) fully competitive consideration when replacing or augmenting peripheral components, and (2) replace installed leased PCME and peripherals on a bulk basis where such a replacement would reduce costs.

In response to our direction, the Air Force, Navy and Defense Supply Agency initiated Requests for Proposals for the competitive replacement of plug-to-plug compatible peripherals and they have been issued. Replacement of additional peripherals for the Army and other DoD Components will be accomplished as part of the Government-wide GSA procurement.

The Bureau of the Budget, as a follow-up to the conference at the Federal Executive Center at Charlottesville in October 1969, issued their Bulletin No. 70-9, dated February 2, 1970. This Bulletin required Federal Agencies to review and make certain determinations regarding the replacement of installed peripheral equipment with more economical equipment produced by independent peripheral manufacturers. This was implemented in the DOD on March 3, 1970, to cover peripherals for which competitive replacement action had not already been initiated by DOD Components.

A complete list of all peripheral equipment in the Department of Defense was prepared by the GSA from the ADPE inventory required by BoB Circular A-83 and distributed by my office to the Services and Defense Agencies. Each piece of equipment was identified by them as either being available for substitution or not, and if not, why not. The annotated list was returned to GSA, to provide them with planning data for their bulk procurement action.

ACTIONS TO SUBSTITUTE INDEPENDENTLY PRODUCED PERIPHERALS

As I previously mentioned, actions have been undertaken by Defense Components to substitute significant amounts of independently produced peripherals for that presently installed. I would like to discuss some of the more important actions with you.

NAVY

The Navy and Marine Corps have completed action on one replacement procurement, are near completion on a second, and are in the midst of competition for a large general buy. The actions cover the following equipment and locations: 1. Potter Instrument received an award last September to replace secondgeneration tape drives at the Ship Parts Control Center, Mechanicsburg, Pennsylvania, and at Bureau of Personnel facilities. Forty tape drives have been installed, at a rental cost 36 percent below the price paid for previous vendor equipment. Savings are estimated by the Navy at $120,000 per year.

2. The Navy ADP Equipment Selection Office (ADPESO) is now ready to award a contract for replacement of IBM third-generation tape drives and disc