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Fourth, in considering the extension of sharing activities or the provision of centralized services full consideration will be given to the use or augmentation of existing facilities in lieu of creating new facilities for the purpose.

Fifth, the comments and recommendations of the Federal agencies who use computers will be solicited and considered in the development of the Government-wide program.

Since the enactment of Public Law 89-306, the Bureau of the Budget has also issued or revised a number of its circulars which enunciate policies and guidelines that apply to all Federal agencies. Circular A-54 which deals with the selection and acquisition of ADP equipment has recently been revised in five important respects. The revision (1) clarifies and reaffirms its application to Government cost reimbursement-type contractors, (2) stipulates that new ADP equipment will not be acquired until all possibilities for sharing existing equipment or utilizing excess equipment are exhausted, (3) cautions agencies to be more specific in stating their requirements for delivery and performance of both hardware and software when executing contracts for equipment, (4) requires the cost of money to be added to the capital investment when comparing costs in deciding whether to buy or lease equipment, and (5) requires displaced equipment to be reported as excess and not retained for other uses unless properly justified.

After many months of developmental work, we have also recently issued Circular A-83 which prescribes the first phase of a more comprehensive ADP management information system. This system, which will be operated and maintained by the General Services Administration, became effective July 1 of this year and will provide essential information on a more timely basis to various echelons of management to assist in achieving more effective use of our ADP resources.

Efforts to improve ADP management have received the strong personal support of the President. On June 28, 1966, he called upon the heads of all Federal agencies to explore and apply all possible means to use the electronic computer to do a better job and to manage computer activities at the lowest possible cost.

In order to evaluate progress being made in the attainment of these objectives the Bureau of the Budget issued Circular A-79 which requires agencies to submit periodic reports of accomplishments. The first of these reports was submitted to the President in February of this year which highlighted the significant accomplishments in using computers to improve the conduct of our Government operations and in our efforts to improve upon the procurement and utilization of this expensive equipment.

Copies of each of the Bureau of the Budget circulars I have just described, together with the President's memorandum and the report of accomplishments, are being provided to the committee.

I should now like to make a brief reference to some of the more important problems that are being given priority attention under the policy directives of the Bureau of the Budget.

The incompatibility that continues to exist among equipment and software remains a serious obstacle in making the most effective and efficient use of our vast ADP resources. This problem is assuming even greater significance in view of the accelerated trend toward the development of systems that involve the exchange of data in machine

trated by the growing interchange of information among Federal, State, and local governments, between the private sector and governmental agencies, and within major segments of Government and industry. Managers of computer systems who have heretofore regarded themselves as self-contained and independent are now required to look beyond their own boundaries and consider the relationship of their systems to other systems.

The problem, therefore, is not-and should not be-a concern of the Federal Government alone. It has important implications for all major users of equipment at all governmental levels and in the private sector as well. We are therefore most interested in working cooperatively with all of these user groups to create a greater awareness of the compelling need for swifter progress toward a more desirable degree of compatibility.

This is not to say that some progress in this direction has not been made. A number of important data processing standards have already been approved for voluntary use under the programs of the United States of America Standards Institute; and these are now under consideration for adoption as Federal standards in which their use, with few exceptions, would become mandatory upon Federal agencies. The matter of developing hardware and software standards requires exhaustive examination before they can be approved and adopted for implementation, and for this reason progress in this direction, at times, seems to proceed at a snail's pace. However, we are hopeful that with the increased attention being given to this problem by the National Bureau of Standards, in conjunction with other major users of equipment and with the data processing industry, we can look forward to substantial improvements over the near future.

The development of greater compatibility among hardware and software will, however, solve only part of the problem related to the more effective development of our information systems. There still remains the need to develop greater compatibility among the data that is being exchanged. To a rather significant degree, differences in the data and in the codes for representing this data in machineprocessable form are sufficient to inhibit or prevent the reliable exchange or summarization of data without extensive and expensive translations. To meet this problem, the Bureau of the Budget is formulating a Government-wide program for standardizing data elements and codes in those cases where standardization is essential. An announcement of this program, which will be conducted in close coordination with similar activities being undertaken under the auspices of the United States of America Standards Institute, is expected to be made in the near future.

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The problem of inadequate software which prevents us from taking full advantage of the increased speed and lower costs of the socalled "third generation" of equipment that is being provided to us by the computer industry also remains high on the list for attention. emergence of software as a key factor in the effectiveness of computer systems requires that we give concentrated attention to the development of softwear standards and criteria by which we can measure the effect of software upon the performance of the computer hardware so that we have a better basis for evaluating the total product

The General Services Administration is undertaking a full-scale review of the entire procurement process in an effort to find ways of simplifying the present procedures and making them more effective. Consideration is being given to the annual negotiations of Federal supply schedules, the formation of negotiating teams to assist agencies in the negotiation of procurement contracts, the cultivation of new sources of procurement, and the use of the ADP revolving fund authorized by Public Law 89-306. To improve upon the utilization of existing equipment, the General Services Administration is also extending its efforts to facilitate the sharing and joint utilization of equipment and to effect the redistribution of excess equipment whenever advantageous. Also, studies are being conducted to determine the need for providing centralized services for Federal agencies in such areas as equipment maintenance and tape restoration.

The significance of the management actions which I have described. must in the final analysis be evaluated in the light of the results they achieve. I would, therefore, like to discuss a few hard facts or statistics. We estimate that our computer inventory as of June 30, 1967, will be slightly in excess of 3,000 computers. There are approximately 42,000 computers installed at present, a figure which incidentally is estimated to double by 1975. Procurement and operating expenses related to the Government's nonclassified inventory during fiscal year 1967 amount to $1.2 billion.

In this committee's report accompanying H.R. 4845 and in other actions which the committee has taken, it has consistently urged that the executive branch give greater attention to the financial advantages of purchasing over leasing computers. It is significant to note that at present more than 50 percent of the computers in the inventory are now owned as compared to 21 percent in 1963. As a result of these purchases, we estimate we are now avoiding annual rental payments of approximately $200 million.

The committee has likewise urged that the executive branch achieve better utilization of our inventory. The average utilization during fiscal year 1967 was 333 hours per month, equivalent to an 80-hour workweek. This is an increase over the 285 hours per month achieved in fiscal year 1963. Within these averages the most expensive computers. reflect a much higher average utilization. I should like to reemphasize the cardinal principle in our program-achieve maximum utilization of existing equipment to avoid procurement of additional equipment. The Director's report to the President in February of this year indicated a saving of $26 million had resulted from the General Services: Administration's program for sharing existing computer capability, In addition, it indicated that excess equipment valued at approximately $70 million had been redistributed for further use in the Government, thereby avoiding procurement of new equipment.

Finally, in reviewing our ADP management posture we must necessarily be sobered by the magnitude and the complexity of the problems that still confront us. Because of the dynamic nature of this new technology to which I referred earlier in my testimony and the interrelationships that exist among these problems, I would caution that progress toward their solution may, at times, seem painfully slow. However, our capability for dealing with these problems has unquestionably been greatly strengthened by the enactment of Public Law 89-306 and

ingly, I am confident that our collective efforts will make a significant contribution to improving the management and use of electronic computers in Government.

Mr. Chairman, this concludes my prepared statement. Mr. Cunningham, Mr. Renninger, and I will be happy to elaborate upon any portion of this statement or to answer any questions that you may have.

Mr. BROOKS. Thank you very much, Mr. Hughes, for an excellent statement. It indicates a perceptive understanding of the problems that we face in implementing this legislation.

The President's letter, without objection, will be included at the conclusion of your statement, and we will put in the appendix the Bureau directives that you have submitted and you have there. Is that correct? Mr. CUNNINGHAM. Yes.

(Attachment to prepared text follows:)

THE WHITE HOUSE

MEMORANDUM FOR HEADS OF DEPARTMENTS AND AGENCIES

I want the head of every Federal agency to explore and apply all possible means to

Use the electronic computer to do a better job, and

Manage computer activity at the lowest possible cost.

I want my administration to give priority emphasis to both of these objectives-nothing less will suffice.

The electronic computer is having a greater impact on what the Government does and how it does it than any other product of modern technology. The computer is making it possible to

Send men and satellites into space;

Make significant strides in medical research;

Add several billions of dollars to our revenue through improved tax administration;

Administer the huge and complex social security and medicare programs;
Manage a multibillion-dollar defense logistics system;

Speed the issuance of GI insurance dividends, at much less cost;

Saves lives through better search and rescue operations;

Harness atomic energy for peaceful uses; and

Design better but less costly highways and structures.

In short, computers are enabling us to achieve progress and benefits which a decade ago were beyond our grasp.

The technology is available. Its potential for good has been amply demonstrated, but it remains to be tapped in fuller measure.

I am determined that we take advantage of this technology by using it imaginatively to accomplish worthwhile purposes.

I therefore want every agency head to give thorough study to new ways in which the electronic computer might be used to—

Provide better service to the public;

Improve agency performance; and

Reduce costs.

But, as we use computers to achieve these benefits, I want these activities managed at the lowest possible cost.

At the present time, the Federal Government

Uses 2,600 computers;

Employs 71,000 people in this activity; and

Spends over $2 billion annually to acquire and operate this equipment, including special military-type computers.

Clearly, we must devote our best efforts to managing this large investment wisely and with the least cost.

I approved a blueprint for action when I approved the Bureau of the Budget "Report on Management of ADP in the Government."

The Congress recognized this need when it enacted Public Law 89-306 (the Brooks bill) last October. This legislation provided specific authorities to

The General Services Administration for the procurement, utilization, and disposition of automatic data processing equipment;

The Department of Commerce for the development of data processing standards and the provision of assistance to agencies in designing computerbased systems;

The Bureau of the Budget for exercising policy and fiscal control over the implementation of these authorities.

These agencies are seeking actively to put into effect ways for improving and reducing the cost of this huge and complex operation.

In my budget message for 1967 I told the Congress of my intent to make sure that this huge investment is managed efficiently.

The Federal Government must give priority attention to

Establishing better and more effective procurement methods;

Making fuller use of existing facilities through sharing and joint-use arrangements before acquiring additional equipment;

Reutilizing excess equipment whenever feasible; and

Achieving, with industry cooperation, greater compatibility of equipment. I expect all agencies to cooperate fully with the Bureau of the Budget, the General Services Administration, and the Department of Commerce in accomplishing these objectives.

I want the Director of the Bureau of the Budget to report to me on December 31, 1966, and every 6 months thereafter, on the progress that is being made throughout the Federal Government in improving the management of this very important technology.

LYNDON B. JOHNSON.

Mr. BROOKS. I would like to recognize Mr. Thompson, who is going to be the assistant minority leader, just temporarily, starting at about 5 minutes to 12. He is going to have to leave, so I will recognize him now for any questions and comments he might have.

Mr. THOMPSON. Thank you, Mr. Chairman.

Mr. Hughes, I do have a few questions and one of which you may not be able to answer at this time, but I would appreciate very much receiving this information. And that is, basically, by agency, how many standard-use computers have been purchased and how many have been leased?

Mr. HUGHES. I don't believe we have that information with us, but we can furnish it for the record.

Mr. CUNNINGHAM. We have it in the office for fiscal year 1966.
Mr. THOMPSON. I would appreciate that very much.
(The information requested is as follows:)

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1 Does not include computers used in control functions which are classified as "exempt" in the inventory.

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