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Letters and statements for inclusion in the record:

Letter and two enclosures from H. A. Abersfeller, Commissioner, Fed-
eral Supply Service, to Hon. William Proxmire, dated August 7,

Letter from William Proxmire, chairman, to Hon. Elmer B. Staats,
Comptroller General of the United States, dated June 12, 1970----
Letter from William Proxmire, chairman, to Hon. Robert P. Mayo,
Counselor to the President, dated June 12, 1970.
Letter from Dwight A. Ink, Assistant Director for Executive Manage-

ment, to Hon. William Proxmire, dated June 29, 1970-

Letter from William Proxmire, chairman, to Hon. Robert L. Kunzig,
Administrator, General Services Administration, dated June 12,









Washington, D.C.

The Subcommittee on Economy in Government met, pursuant to notice, at 10:10 a.m., in room S-407, the Capitol Building, Hon. William Proxmire (chairman of the subcommittee) presiding.

Present: Senator Proxmire; and Representatives Griffiths and Brown.

Also present: John R. Stark, executive director; Richard F. Kaufman, economist; and Ray Ward, consultant.

Chairman PROXMIRE. The subcommittee will come to order. During this subcommittee's hearings in November and December 1967, we learned that the Government's bill for the purchase and rental of automatic data processing equipment (ADPE) was about $3 billion per year. I now understand informally that it is somewhere in the magnitude of $4 to $6 billion a year and hope that today's witnesses will give us the current figure. In November 1967 we also learned that Government agencies were procuring the computer systems and so-called peripheral equipment almost entirely from the large systems producers and that the small business manufacturers of this type of equipment were left out for one reason or another.

On November 30, 1967, Mr. Lewis R. Caveney, representing some 50 small peripheral manufacturers gave us some interesting and important testimony that the small manufacturers, if given an opportunity to supply some of the Government's needs, could do so at large savings to the taxpayers. He cited some specific examples and the subcommittee asked the General Accounting Office to check into the validity of Mr. Caveney's statements.

The General Accounting Office made a detailed study and issued an excellent report, B-115369, on June 24, 1969, entitled "Study of the Acquisition of Peripheral Equipment for Use With Automatic Data Processing Systems." This report indicated that very large savings, running into millions of dollars, were possible through utilizing the smaller sources of supply, instead of relying exclusively upon the large systems manufacturers.

This report was sent to the Budget Bureau and other executive agencies with the suggestion that action programs be initiated toward more economical procurement of computers and their components. The subcommittee's report of April 1968, which was based upon the hearings, had two specific recommendations: (1) regarding the need


to conduct Government procurements of automatic data processing equipment so as to include the smaller manufacturers and that specifications should not be designed around the products of certain large companies, thus restricting competition, and (2) that the pending inventory of Government-owned ADPE, including that in the hands of contractors, should be completed as soon as possible and kept current so as to prevent unneeded future purchases.

These are the principal points upon which the hearings will be based today. We will have witnesses from the GAO, BOB, GSA, DOD, and industry. We have also asked that representatives from the National Bureau of Standards and the Office of Emergency Preparedness be present to answer questions if need arises.

At this time, I want to publicly compliment Comptroller General Staats, Mr. Ed Mahoney, and other members of the GAO staff for the excellent work they have done in this important segment of Government procurement. Without objection the GAO report, B-115369 (see appendix II), will be included in the record, together with Budget Bureau Bulletin No. 70-9.

(Budget Bureau Bulletin No. 70-9 referred to above follows:)

Washington, D.C., February 2, 1970.


To: The Heads of Executive Departments and Establishments.
Subject: Acquisition of peripheral components for installed ADP systems..

1. Purpose. This Bulletin requires Federal agencies to review and make certain determinations on whether leased peripheral equipment components in computer systems supplied by the system manufacturer should be replaced with less costly equipment available from independent peripheral manufacturers or other sources.

2. Background.--According to information provided by agencies under the ADP Management Information System (see BOB Circular A-83), there are many ADP systems in operation in which certain peripheral components currently being leased from the system supplier could be replaced with comparable components offered by independent manufacturers at substantial cost reductions. The Comptroller General's report of June 24, 1969, discusses in detail the possibility of achieving economies through a program for replacing installed equipment with "plug-to-plug" compatible peripheral units.

3. Agency reviews.-Federal agencies will review all installed leased peripheral components for which there are compatible, reliable and comparable substitutes available at lesser cost to determine where substitutions should be made for cost saving reasons. To facilitate this review, the General Services Administration will, by February 6, 1970, transmit to each Federal agency a listing of all installed leased components which, as of June 30, 1969, were scheduled to be retained for a period long enough to assure the achievement of the potential cost reduction. Instructions on the use of this listing will be provided by the General Services Administration.

Each agency upon receipt of the listing will review it in consideration of the agency's present equipment retention plans and/or component substitution plans currently under way, and determine those instances in which substitution actions would be consistent with the plans. Following this determination and no later than April 15, 1970, the agency will advise the General Services Administration of the substitutions that should be made by returning an annotated copy of the listing. From the consolidated replies, the General Services Administration will be in a position to determine the additional procurement actions that should be taken and, in coordination with the agencies involved, will institute appropriate action. For those peripheral components on the General Services Administration listing which the agency determines should not be replaced with a lower cost substitute, the reason for such

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