PAGENO="0001" -EGONOMJ~~-4~j~. EFFICIENT USE OF ~jjç~ DTit1ROtESSJ~ EQUIPMENT G~~!~33 HEARING BEFORE A SUBCOMMITTEE OF THE COMMiTTEE ON GOVERNMENT OPERATIONS HOUSE OF REPRESENTATIVES EJGHTYEIGHTH CONGRESS FIRST SESSION ON H.R. 5171 A BILL TO AUTHORIZE THE ADMINISTRATOR OF THE GEN- ERAL SERVICES ADMINISTRATION TO COORDINATE AND OTHERWISE PROVIDE FOR TIlE ECONOMIC AND EFFI- CIENT PUROHASE, LEASE, MAINTENANCE OPERATION, AND UTILIZATION OF ELECTRONIC DATA PROCES/SING EQUIPMENT BY FEDERAL DEPARTMENTS AND AGENCIES MAY 28, 19G3 Printed for the use of the Committee on Government Operations 0~ U.S. GOVERNMENT PRINTING OFFICE 99370 WASHINGTON : 1963 PAGENO="0002" ~M~EE ON GOVERNMENT OPERATIONS WILLIAM L. DAWSON, Illinois, Chairman CHET HOLIFIELD, California JACK BROOKS, Texas L. H. FOUNTAIN, North Carolina PORTER HARDY, JR., Virginia JOHN A. BLATNIK, Minnesota ROBERT B. JONES, Alabama EDWARD A. GARMATZ, Maryland JOHN B. MOSS, California DANTE B. FASCELL, Florida HENRY S. REUSS, Wisconsin JOHN S. MONAGAN,, Connecticut RICHARD E. LANKFORD, Maryland TORBERT H. MACDONALD, Massachusetts J. EDWARD ROUSH, Indiana WILLIAM S. MOORHEAD, Pennsylvania CORNELIUS E. GALLAGHER, New Jersey WILLIAM J. RANDALL, Missouri BENJAMIN S. ROSENf]?HAL, New York CHRISTINE RAY DAvis, Stdff Director JAMES A. LAWmAN, General Counsel MILES Q. ROMNEY, Associate General Counsel MALCOLM K. EDWARDS, Minority Professional Staff J. P. CARLSOW, Minority Counsel GOVERNMENT ACTIVITIES SUBCOMMITTEE JACK BROOKS, Pexas, Chairman WILLIAM S..MOOREEAD, Pennsylvania GEORGE M. WALLEAUSEIL New Jersey CORNELIUS B. GALLAGHER, New Jersey BILL STINSON, Washington BENJAMIN S ROSENTHAL, New York ERNEST C. BAYNARD, Staff Administrator DANIEL L. POWER, Counsel IRMA REEL, Clerk R. WALTER RIEHLMAN, New York GEORGE MEADER, Michigan CLARENCE J. BROWN, Ohio FLORENCE P. DWYER, New Jersey ROBERT P. GRIFFIN, Michigan GEORGE M. WALLHAUSER, New Jersey JOHN B. ANDERSON, Illinois RICHARD S. SCHWEIKER, Pennsylvania OGDEN R. REID, New York FRANK J. HORTON, New York BILL STINSON, Washington ROBERT McCLORY, Illinois II PAGENO="0003" CONTENTS ~* Page H.R. 5171 3 Statement of- Boutin, Bernard L., Administrator, General Services Administration; accompanied by Robert T. Griffin, Assistant Administrator; William P. Turpin, Assistant Administrator for Finance and Ad- ministration; and Joe E. Moody, General Counsel - 21 Campbell, Hon. Joseph, Comptroller General of the United States; accompanied by Edward J. Mahoney, Associate Director, Account- ing and Auditing Policy Staff; and John W. Moore, attorney, Office of the General Counsel 5 Letters, statements, etc., submitted for the record by- Boutin, Bernard L., Administrator, General Services Administration: Excerpt of a report from the Comptroller General of the United States, to the Congress, March 6, 1963 23 Memorandum outlining the comparable duties presently per- formed by the General Services Administration to those set forth under H.R. 5171 50 Brooks, Hon. Jack, a Representative in Congress from the State of Texas, and chairman, Government Activities Subcommittee: Excerpt from the Comptroller General's report on data processing equipment 2 Excerpt of a letter from the Comptroller General, to the Govern- ment Operations Committee, May 15, 1963 2 Exhibit 1-List of GAO reports issued to the Congress on ADP equipment 9 Letter from David E. Bell, Director, Bureau of the Budget, to the heads of executive departments and establishinents, October 14, 1961, with attachments - - 31 Letter from Elmer B. Staats, Acting Director,.. Bureau of the Budget, to the heads of executive departments and establish- ments, October 9, 1959, with attachments 38 Campbell, Hon. Joseph, Comptroller General of the Uiiited States: Excerpt of a report from the General Accounting Office entitled "Review of Automatic Data Processing Developments in the Fed- eral Government," December 30, j960 6 Mahoney, Edward J., Associate Director, Accounting and Auditing Policy Staff, General Accounting Office: Statement of the General Accounting Office on the specific factors to be considered in the development of a more positive long-range planning for the use of automatic data processing equipment in the Federal Government- - 11 TOPICAL INDEX Poor utilization practices of Federal agencies 8 Poor ADP utilization-a serious and costly problem 10 24 hours a day utilization of ADP equipment essential to maximum efficiency 10 Increasing use of ADP equipment in Government 10 Need for long-range planning and factors involved 10 Savings of $100 million a year-a conservative estimate 13 Need to extend HR. 5171 to include contractor-operated equipment 14 No agencies should be exempt from centralized control 14 GSA has ability to watch over this complex problem 14 ui PAGENO="0004" IV CONTENTS Page ADP costs-a fixed charge on Government 15 Need for continuing review of agency utilization pra tices 15 Continuing congressional review of ADP utilization 16 Equipment used for tactical, intelligence, and oth r classified activities not included in GAO study 16 Equipment used by Government contractors 17 Capital costs o~pu~oh~ing equipment 17 Purchase when advantageous to Government 18 Exemption of agencies - 19 GSA-logical agency to perform central management function 24 GSA presently has similar responsibilities to those inherent in H.R. 517L - 25 Need for long-range planning 25 Centralized management would materially assist Bureau of the Budget 26 GSA Administrator suggests minimum of exemptions 26 Period of time necessary to implement APP program 27 APP funds-available without fiscal year limitation 27 Timeliness of HR. 5171 28 Availability of personnel 29 Trade-in of equipment 29 Price benefit of bulk purchases~~. 30 Need for legislation 48 Amount of capital in APP revolving fund 48 APPENDIXES Appendix I-Report to the Congress of the United States, study of finan- cial advantages of purchasing over leasing of electronic data-processing equipment in the Federal Government, by the Comptroller General of the United States, March 1963 55 Appendix lI-Bureau of the Budget report entitled "Inventory of Auto- matic Data Processing (APP) Equipment in the Federal Government, Including Costs, Categories of Use, and Personnel Utilization, August 1962" 98 Appendix Ill-Agency reports on H.R. 5171: 1. General Accounting Office 164 2. General Services Administration 165 3. Treasury Department 167 4. Bureau of the Budget 168 (a) Tennessee Valley Authority 169 (b) Federal Aviation Agency 170 (c) Atomic Energy Commission 172 (d) Post Office Department 173 (o) Department of Labor 174 (f) Department of Agriculture 175 (g) Department of Defense 176 PAGENO="0005" ECONOMIC AND EFFICIENT USE OF AUTOMATIC DATA PROCESSING EQUIPMENT Authorizing the Administrator of the General Services Admin- istration To Coordinate and Otherwise Provide for the Economic and Efficient Purchase, Lease, Maintenance, Operation, and Utilization of Electronic Data Processing Equipment by Federal Departments and Agencies (H.R. 5171) TUESDAY, MAY 28, 1963 HOUSE OF REPRESENTATIVES, GOVERNMENT ACTIVITIES SUBCOMMITTEE, OP THE COMMITTEE ON GOVERNMENT OPERATIONS, TVa.chki~gton, D.C. The subcommittee met, pursuant to notice, at 10: 15 a.m. in room H-329, the Capitol, Hon. Jack Brooks (chairman of the subcommit- tee) presiding. Present: Representatives Jack Brooks, William S. Moorehead, Benjamin S. Rosenthal, and Bill Stinson. Staff present: Ernest C. Baynard, staff administrator; Daniel L. Power, counsel, and Irma Reel, clerk. Mr. BROOKS. The subcommittee will come to order. The Government Activities Subcommittee, having been duly orga- nized under the rules of the House of Representatives, and a quorum being present for the purpose of taking testimony and receiving evi- dence, the meeting is hereby called to order. The purpose of the meeting this morning is to hear testimony on H.R. 5171, a bill to authorize the Administrator of the General Serv- ices Administration to coordinate and otherwise provide for the eco- nomic and efficient purchase, lease, maintenance, operation, and uti- lization of electronic data processing equipment by Federal depart- ments and agencies. The purposes of H.R. 5171 are specific and direct. First, enactment of this measure will provide the necessary organization and authority for the centralized, coordinated management of automatic data processing equipment acquisition and utilization on a Government- wide basis. Second, through the use of this organization and author- ity as provided in H.R. 5171, more than $100 million a year in sound, accountable, direct savings can be realized to the obvious benefit and appreciation of the Nation's taxpayers. 1 PAGENO="0006" 2 AUTOMATIC DATA PROCESSING EQUIPMENT The provisions of H.R. 5171, its purpose, and potential effect, stem from a recent report of the Comptroller General and the continuing interest of this subcommittee in getting a full dollar's worth of effi- cient, responsive Government for every tax dollar paid. In his report the Comptroller General emphasized in the strongest terms the need for centralized management, acquisition, and utilization of this costly but highly useful data processing equipment. He authoritatively out- lined the cash savings which can result from such a program. In this report, submitted to Congress in March of this year, the Comptroller General advised, and I quote: Our study shows that very substantial amounts of money could be saved if the Federal Government purchased more of its data processing equipment needs. The detailed cost comparisons of 16 different electronic machine models, which constituted the principal part of our study, indicate potential savings of about $148 million over a 5 year period These significant possible savings apply to only 523 of approximately 1,000 electronic data processing systems installed or planned for installation on a lease basic by June 30, 1963. For additional use of the 523 machines after 5 years, there would be further savings at the rate of over $100 million annually. The Comptroller General continued by saying that: Decisions as to the financial advantages of purchasing will have to be made from the standpoint of the Government as a whole, and not primarily from the standpoint of individual using agencies as has been the practice in the past. In addition, more attention needs to be given to obtaining more complete utilization of the equipment acquired. We believe that the only practicable way in which the kind of coordinated management can be practiced to achieve the possible financial savings cited is through the establishment of a small, highly placed central management office in the executive branch of the Government. The record of the House of Representatives in effecting responsible savings in expenditures and providing for increased economy and efficiency in Government is a commendable one. And, I believe, the contribution to these efforts of this subcommittee and the Government Operations Committee as a whole has been significant over the years. Among the specific responsibilities of this committee is the obliga- tion to receive and examine reports of the Comptroller General of the United States and of submitting such recommendations to the House as may be deemed necessary. H.R. 5171 constitutes such a recom- mendation. Following review of this measure, the Comptroller Gen- eral, speaking for the General Accounting Office, in a letter dated May 15, 1963, advised that- We believe enactment of the bill would be in the best interest of the Govern- ment and will result in considerably more economical procurement and utiliza- tion of electronic data processing equipment. According to the provisions of H.R. 5171, the General Services Administration is charged with the managing of automatic data proc- essing equipment. This authority, of course, is to be exercised under the existing authority of the Bureau of the Budget in its exercise of comprehensive budgetary and policy control. The GSA, as an operating agency of the executive, has been given the responsibility for assigning, regulating, or performing for execu- tive agencies, as it finds advantageous in terms of economy, efficiency, or service, functions pertaining to procurement, supply and main- tenance of real and personal property and nonpersonal services. The overall record of the GSA in assisting the President and the Bureau PAGENO="0007" AUTOMATIC DATA PROCESSING EQUIPMENT 3 of the Budget in bringing about more efficient and economical conduct of Government service has been an outstanding one. As already demonstrated in actual, hard dollar savings, IILR. 5171 anticipates that the GSA also can be a valuable working tool of the Bureau of the Budget in effectively coordinating overall Govern- ment policies in regard to the procurement and utilization of excep- tionally expensive automatic data processing equipment. The Bureau of the Budget, of course, will continue to exercise ultimate control for the President of the procurement and use of this equipment through its unquestioned authority in assisting the President in the preparation of the executive budget and control over the administra- tion of the budget. It can also be anticipated that under the coordinated management program proposed in H.R. 5171, legislative review and control of Government automatic data processing operations can be greatly im- proved. Comprehensive information-from, one source-will be available to the substantive committees of Congress as a valuable aid to plans and programs. The Appropriations Committees will have all the facts concerning all APP equipment readily available in determining proper funding for these important but costly installa- tions. And, of course, effective centralization of the management of this equipment will materially assist the Government Operations Committee and the Comptroller General in our periodic review of these activities. H.R. 5171 offers the opportunity for a comprehensive, coordinated Government-wide APP program which can be reflected into im- proved governmental services to the American public. It is vitally important that the authority outlined in this proposal, which will have such a beneficial impact upon the internal management of gov- ernmental affairs, be approved without delay. Equally important, the American taxpayers can justifiably view with great impatience any delays postponing the day when savings amounting to more than $100 million a year can begin to accrue to their benefit. (H.R. 5171 follows:) [HR. 5171, 88th Cong., 1st sess.}~ A BILL To authorize the Administrator of the General Services Administration to coordinate and otherwise provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of electronic data processing equipment by Federal departments and agencies Be it enacted by the Senate and Hou$e of Repreeentatives of the United States of America in Congress assembled, That title I of the Federal Property and Administrative Services Act of 1949 (63 Stat. 377), as amended, is hereby amended by adding a new section to read as follows: "Sac. 111. The Administrator is authorized and directed to coordinate and control the purchase, lease, maintenance, and use of electronid data processing equipment by Federal agencies, and to operate or provide for the operation by delegation of authority or otherwise, of such equipment. Electronic data processing equipment suitable for efficient and effective use by Federal agencies shall be provided by the Administrator through purchase, lease, transfer of equipment from other Federal agencies, or otherwise and the Administrator is authorized and directed to provide by contract or otherwise for the main- tenance and repair of such equipment. In carrying out his responsibilities under this section the Administrator Is authorized to transfer electronic data processing equipment between Federal agencies, to require joint utilization of such equipment by two or more Federal agencies, and to establish equipment pools and data processing centers for such joint use when necessary for its PAGENO="0008" 4 AUTOMATIC DATA PROCESSING EQUIPMENT most efficient and effective utilization: Provided, That the Administrator, in his discretion, may delegate authority to lease, purchase, maintain, or operate (1) general classes of equipment, (2) equipment of special design needed to fulfill some unique requirement or special purpose of a particular Federal agency, and (3) equipment necessary for national defense and security. "There is hereby authorized to be established on the books of the Treasury, an electronic data processing fund, which shall be available without fiscal year limitation for expenses, including personal services, other costs, and the pro- curement by lease, purchase, transfer, or otherwise of equipment, maintenance and repair of such equipment by contract or otherwise, necessary for the effi- cient coordination, operation, utilization of such equipment by and for Fed- eral agencies. "There are authorized to be appropriated to said fund sncb sums as may be required which, together with the value, as determined by the Administrator, of supplies and equipment from time to time transferred to the Administrator, less any liabilities assumed, shall constitute the capital of the fund: Provided, That said fund shall be credited with (1) advalices and reimbursements from available appropriations and funds of any agency (including the General Services Administration), organization, or persons utilizing such equipment and services rendered them, at rates determined by the Administrator to approximate the costs thereof met by the fund (including depreciation of equipment, provision for accrued leave, and where appropriate, for terminal liability charges and for amortization of installation co~ts, but excluding, in the determination of rates prior to the fiscal year 1966, such direct operating expenses as may be directly appropriated for, which expenses may be charged to the fund and covered by advances or reimbursements from such direct appropriations) and (2) refunds or recoveries resulting from operations of the fund, including the net proceeds of disposal of excess or surplus personal property slid receipts from carriers and others for loss of or damage to property: Provided further, That following the close of each fiscal year any net income, after making provisions for prior year losses, if any, shall be transferred to the Treasury of the United States as mis- cellaneous receipts." Mr. BRooKs. As our first witness today, we have the honor of having with us the Honorable Joseph Campbell, the Comptroller General of the United States. Aside from an eminently successful career in busi- ness and in his profession, the Comptroller General has an illustrious record of public service. He has served as vice president and treasurer of Columbia University and subsequently was a member of the U~S. Atomic Energy Commission. In December 1954 he was appointed the Comptroller General for a term of 15 years. Before hearing from the Comptroller General, I would like to add that in making recommendations relating to the utilization of ADP equipment, the Comptroller General practices what he prea~hes~ An impressive example of efficient acquisition and utilization of ADP equipment can be found in the General Accounting Office build- ing. Following a long-range study in coordination with the Treas- ury Department, the Comptroller General has established an APP system in cooperation with Treasury for the auditing and reconcilia- tion of Government cherks. Under this program, Treasury and the General Accounting Office auditing requirements have been carefully coordinated and the awesome task of balancing the Federal Govern- ment's checkbook has been effectively and efficiently resolved. I might add that the Comptroller General's oil~ee commented as recently as yesterday that the Treasury Department anticipates proc- essing 460 million checks annually. It may run eventually to 484 million. These are numbers of individual checks. Also, using this same equipment, post office money orders are audited. And, furthermore, the equipment is made available to PAGENO="0009" AUTOMATIC DATA PROCESSING EQUIPMENT 5 other departments, such as Agriculture and Labor, to provide for its most efficient utilization on a Government-wide basis. Mr. Campbell, it is a pleasure to welcome you and to have this opportunity for obtaining an expression of your recommendations on H.IR. 5171. STATEMENT OP HON. 30SEPH CAMPBELL, OOMPTRGLLER GEN- ERAL OP THE UNITED STATES;, ACCO~PARIEB BY EDWARD J~. MAHONEY, ASSOCIATE DIRECTOR, ACCOUNTING AND AUDITING POLICY STAPP; AI~D J~OI~N W. MOORE, ATTORN~Y, QITICE OP THE GENERAL COUNSEL Mr. CAMPBELL. Thank you. Mr. Chairman and members of the subcommittee, at your request we appear before you today to present our views on H.R. 5171, a bill to au~t1wri~e the Administrator of the General Services Administration to coordinate and otherwise provide for the economic and efficient purchase, lease, maintenance, operution, and utilization of electronic data processing equipment by Federal departments and agencies. In view of the extremely significant possible savings and of the great need for central coordination over procurement and utilization of this costly equipment, we favor enactment of the proposed legisla- tion subject to the changes suggested to the chairman of the Govern- ment Operations Committee in our letter of May 15, 1963. As you know, in recent years there has been a very sizable increase in the use of automatic data processing equipment in the Federal Government. Also, costs related to data procesing equipment pro- grams have increased greatly in the past 3 or 4 years. For example, according to the, Bureau of the Budget's inventory report of such equipment in the Federal Government, at the end of fiscal year 1959, 414 computer systems were installed in Federal agencies at an annual cost of $250 million. By June 30, 1963, it is estimated that there will be 1,169 computer systems installed at an annual cost of $568 million. Total Federal Government costs for data processing equipment for fiscal year 1963, including costs for punched card equipment, will amount to $688 million. These costs are exclusive of amounts for equipment installed for military tactical operations, intelligence, surveillance systems, and certain other classified activities of the Government. Over the past several years our Office has made a number of studies in the automatic data processing field throughout the Federal Gov- ernment so as to enable us to report to the Congress on the trend of development and use of these systems in Government operations generally. Our first Government-wide review was completed in 1958 and a special report, which summarized the results of our study, was submitted to the Congress on June 27, 1958. Our second overall report on this subject was completed in 1960 and a report entitled "Review of Automatic Data Processing Developments in the Federal Government" was submitted to the Congress on December 30, 1960. These two reports were prepared for the express purpose of advis- ing the Congress of the trend of development of this rapidly expand- ing field. Also, as a result of our regular accounting and auditing PAGENO="0010" 6 AUTOMATIC DATA PROCESSING EQUIPMENT work in the agencies, we have issued a number of audit reports to~ the Congress and to agency officials covering specific aspects of APP operations. In our December 1960 report to the Congress, we stated that: Generally, the practice of each Government agency is to procure equipment for its own needs (on either a purchase or a rental basis) and to trade in pur- chased equipment or exchange older rented equipment for newer models in accordance with its own particular needs. Possible needs of other agencies for the traded-in or exchanged equipment are generally not considered. How- ever, it is possible that such equipment can be used to serve the needs of other Government agencies. At least one major eciuipment supplier offers terms under which used equip- ment can be purchased at a reduced price depending on the period of time the equipment has been in use. However, we believe that a Government~wide ap- proach is needed to determine which machines should be purchased at the reduced prices and retained for Government use in lieu of new procurement. Likewise, before trading in purchased equipment which is no longer suItable for the original using organization, efforts should be made to determine the possibility of transferring the purchased equipment to other Government organi- zations requiring such equipment in lieu of new procurement. We believe that a mechanism should be established in the Government to provide the necessary arrangements whereby the procurement and transfer of data processing equipment between Government activities would be fully co- ordinated so as to keep costs as low as possible, consistent with obtaining needed processing facilities. Because of lack of executive branch action on this suggestion, con- gressional interest in the subject, and the increase in costs associated with the use of APP equipment in Federal operations, we made a comprehensive study of the relative merits of purchasing verus leas- ing of data processing equipment. Our report of this study, entitled "Financial Advantages of Purching Over Leasing of Electronic Data Processing Equipment in the Federal Government," was submitted to the Congress on March 6, 1963. A copy of this report was sent at that time to the chairman of this subcommittee. In this report we pointed out that the cost comparisons made in our study demonstrated that very substantial amounts of money could be saved by the Government in the years to come if, in acquiring the use of needed data processing equipment, proper cost comparisons were made in advance, action were taken to purchase equipment when such comparisons indicated the financial advantages of such actions,, and effective procedures were established to obtain the fullest practi- cable utilization of such equipment by Government agencies. The cost comparisons with respect to the 16 machine models studied during our review indicate potential savings of approximately $148 million over a 5-year period. The 16 models used for our study repre- sent 523 of the approximately 1,000 electronic data processing systems installed or planned for installation on a lease basis by June 30, 1963. For additional use of the 523 machines after 5 years, there would be further savings at the rate of over $100 million annually. We further pointed out that with the present system of decentralized management in the Federal Government under which each agency makes its own decisions as to whether data processing equipment should be acquired by lease or purchase, there is no effective coordinat- ing machinery to work to give consideration to these alternatives from the standpoint of benefit to the Government as a whole. Because of the very substantial financial savings that can be realized through PAGENO="0011" AUTOMATIC DATA PROCESSING EQUIPMENT 7 more extensive purchasing of such equipment and the related need for directing and coordinating its utilization throughout the Government, we recommended that the President of the United States establish in his organization a central management office suitably empowered with responsibility and authority to make decisions on the procurement and utilization of data processing equipment with the objective of obtain- ing and utilizing all needed facilities at least cost to the Government. Our report expressed the conviction that the establishment of a central management office for this function is the only practicable way to pro- vide the kind of management that will make possible the reaii~ation of savings of hundreds of millions of dollars in the years to co~ne. However, we recognize that there are various ways in which central control can be exercised over the procurment and utilization of this type of equipment. H.R. 5171 provides such an alternate method. We are not opposed to the method set forth in H.R. 5171; however, we feel that the mechanism proposed in H.R. 5171 for carrying out the detailed operations of coordination and control needs to be subject to the policy guidance and overall direction of the Office of the President. We would like to call your attention to the fact that the study which formed the basis of our March 1963 report related only to costs for ADP equipment operated by Government agencies. It did not extend into costs incurred for equipment operated by Government con- tractors performing under negotiated contracts. Although there is no comprehensive inventory of such equipment available, we believe, based on the preliminary work that we have done to date in this area in defense, space, and other Government programs where this equipment is extensively used, that the general practice is to lease rather than to purchase such equipment. It is very likely that total savings available through use of Government-owned, con~ tractor-operated equipment would greatly exceed the savings indicated in our March report on agency-operated equipment. ~We therefore be- lieve that, to the maximum extent practicable, data processing equip- ment or systems required by contractors in the performance of negoti- ated contracts with the Federal agencies where the whole or a substan- tial part of the cost of such equipment or systems would become a part of Government contract prices should be furnished by the Government with title or leasehold interest remaining in the Government subject substantially to the same laws and regulations applicable to in-house Government equipment. Thus; the committee may wish to consider amending H.R. 5171 to incorporate such a requirement. Mr. Chairman, this concludes my prepared statement. We will be glad to answer any questions you or the members of your subcom- mittee may have regarding our work in this area. I have with me today Mr. Edward Mahoney, who is in charge of our ADP group, and John Moore of the office of our General Counsel, who is familiar with most of the aspects of this prdblem. Mr. BROOKS. Thank you very much. I would like to submit for the appendix of our record that March 1963 report which you mentioned in conjunction with your earlier reports. We would be pleased to have Mr. Mahoney, who is the Associate Director of accounting and auditing policy staff, respond. PAGENO="0012" 8 AUTOMATIC DATA PROCESSING EQUIPMENT Turning first to this March 1963 report, sir, you suggest that a significant saving can result from purchase rather than lease of APP equipment needed by Federal agencies; is that correct? Mr. CAMPBELL. Yes, sir. POOR ~`I~ILIZATION PRAOTICES OP FEDERAL AGENCIES Mr. BROOKS. In this and other reports you pointed out that other poor APP utilization practices exist; is that right? Mr. CAMPBELL. Yes, sir. Mr. BRooKs. Have you found that some agencies made overpay- ments under lease agreements? Mr. CAMPBELL. Yes. Mr. BROOKS. I am referring to your June report. Mr. CAMPBELL. Yes, our spot reviews have indicated that, in some of the civil and defense using agencies~ there had been overcharges. I think the amount was about $1~5,0OQ. I think that amount has been recovered. Also in June 19~2, the Department of Defense overcharge reported was about $20'T,OOO, but these are very isolated instances and are no indication of what the total overcharges might have been. Mr. BROOKS. But does it indicate at least $375,000 was picked up just as a result of an incidental examination and report;? Mr. CAMPBELL. Yes, sir. Mr. BROOKS. Have agencies on occasion failed to take advantage of discount sales prices available to them? Mr. CAMPBELL. In some instances that happened. Offers to sell equipment at discount prices-on numerous occasions agencies such as FAA and Atomic Energy Commission have not taken advantage of these opportunities to obtain discounts, even though the purchase price was highly favorable as compared to annual rentals being paid on such equipment at that time. Mr. BROOKS. Have agencies on occasion failed to take advantage of purchase provisions in the lease contracts when equipment involved would have had some continuing value to the Federal Government? Mr. CAMPBELL. I would like Mr. Mahoney to answer that. Mr. MAHONEY. Yes, Mr. Chairman. In these cases, as pointed out in our report, the idea is that the equipment is generally useful for many tasks, and it is general-purpose type equipment we are talking about. This means that in the final analysis, when one agency no longer has the need, we have in the Federal Government a successively lower level of need. If you should establish this organization in GSA, they could even use some of this equipment to help manage the program you are proposing to' establish. This equipment can be used for long periods of time, no question about it. Mr. BROOKS. I place in the record at this point a list of General Accounting Office reports on APP equipment issued to the Congress. PAGENO="0013" AUTOMATIC DATA PROCESSING EQUIPMENT ExHIBIT 1.-List of GAO reports issued to the Congress on ADP equipmcnt 9 TITLE Survey of Progress and Trend of Development and Use of Auto- matic Data Processing in Business and Management Control Systems of the Federal Government as of December 1957. Review of Automatic Data Processing Installation, New Orleans Commodity Office, Commodity Stabilization Service, Depart- ment of Agriculture, October 1959. Audit of Check Payment and Reconciliation Functions, Office of the Treasurer oil the United States, Treasury Department, December 1959. Review of Automatic Data Processing System at the Transporta- tion Materiel Command, Department of the Army, St. Louis, Mo. Review of Automatic Data Processing Developments in the Federal Government. Review of Automatic Data Processing Activities at Department Headquarters and at the New York and Richmond Offices, Post Office Department, March 1961. Review of Automatic Data Processing of Series E U.S. Savings Bonds, Bureau of the Public Debt (Parkersburg, W. Va.; Office), Treasury Department. Review of Automatic Data Processing System Used in Supply Manarement h~r the Department of the Navy Aviation Supply Office, Philadelphia, Pa. Review of Selected Aspects of Awards by General Services Ad- ministration and Administration by Certain Using Agencies of Contracts for Rental of Electronic Data Processing Equip- ment. Review of the Administration of Contracts for Rental of Auto- matic Data Processing Equipment at Selected Military Instal- lations within the Department of Defense. Review of Planning for Automatic Data Processing Equipment, Washington, D.C., Regional Office, General Services Admin- istration, October 1961. Review of Automatic Data Processing Activities at Selected Regional Offices, General Services Administration. Review of Selected Automatic Data Processing Activities under Atomic Energy Commission Cost-Type Contracts with Uni- versity of Chicago and Midwestern Universities Research Association. Study of Financial Advantages of Purchasing over Leasing of Electronic Data Processing Equipment in the Federal Gov- ernment. Review of Selected Automatic Data Processing Facilities, Na- tional Bureau of Standards, Department of Commerce. Review of the Excessive Cost of Leasing Compared with Buying Certain Electronic Data Processing Equipment by the De- partment of the Air Force. REPORTS TO CONGRESSIONAL COMMITTEES I Review of Electric Accounting Machine Reports, U.S. Army Signal Supply Agency, Philadelphia, Pa. Review of Payroll Earning Records Produced by EDP Equip- ment, Mare Island Naval Shipyard, Vallejo, Calif. Review of Certain Aspects of EDP, San Antonio Air Materiel Area, Kelly Air Force Base, Tex. Review of Research and Development Costs for BIZMAC, Ra- dio Corp. of America. Lease versus Purchase of ADP Equipment (Interim ReportL. Lease versus Purchase of ADP Equipment Committee on Government Operations, House ~of Representa- tives: Review of Procurement of ADP Equipment, U.S. Army, Fort Benjamin Harrison, md. Committee on Veteran's Affairs, House of Representatives: Study of Feasibility and Desirability of Merging Insurance Office, Veterans' Administration. Select Committee on Small Business, House of Representa- tives: Review of Department of the Army Procurement of ADP Equipment, Fort Mends, MU. Committee on Post Office and Civil Service, House of Repre- sentatives: Investigation of Allegations Pertaining to Waste and Misman- agement in the Statistical Service Operations, Warner Robins Air Materiel Area, Robins Air Force Base, Ga. Review of ADP Installation, Geological Survey, Department of the Interior. Review of Selection and Utilization of ADP Equipment, Na- tional Institutes of Health, Public Health Service, Depart- ment of Health, Education, and Welfare. Date Reference B number Tune 1958 May 1960 August 1960 September 1960 - December 1960 - January 1962 April 1962~.. May 1962 June 1962 do - August 1962 November 1962~ February 1963 March 1963 - April 1963 - do - Mar. 4, 1960 Apr. 6, 1960 June 30, 1960 do Aug. 26, 1960 Nov. 8, 1961 Feb. 8, 1960 Aug. 8, 1962 Jan. 29, 1960 Sept. 28, 1959 Dec. 15, 1959 Jan. 29, 1960 11-115369 B-133306 B-1l8608 11-125073 B-1l5369 B-133385 11-133180 B-133118 B-146732 11-146732 B-146744 B-146732 11-146763 11-115369 13-114821 B-146732 IB-115386 111-132978 B-118734 11-133311 B-133323 B-115386 B-115386 11-133063 B-1l4859 11-133270 B-133090 11-133261 B-133268 I Reports not available for general distribution without permission of the congressional committee. PAGENO="0014" 10 AUTOMATIC DATA PROCESSING EQUIPMENT POOR ADP UTILIZATION-A SERIOUS AND COSTLY PROBLEM Mr. BRooKs. Mr. Campbell, in light of this, do you feel that these poor utilization conditions, including the question of lease-versus- purchase, could be improved by having the kind of central coordina- tion that is provided in this bill, H.R. 5171? Mr. CAMPBELL. We are convinced of it. We hope that this will be done. This is one of the most serious problems the Government is facing in this area. Mr. BROOKS. I have talked with Mr. Campbell at some length about this. He casually mentioned that he had been interested in this for a long time, and with some apologies to him, I was thinking he was referring to his 1958 report. The General said, "I was thinking, Jack, of the fact that about 1928 some people had had a machine"- what was it, they were going to use it at Columbia? Mr. CAMPBELL. That was 35 years ago, one of the early installations of this very elementary type of computing system. We have in our office a select group of people who concentrate on the whole very, very difficult problem which we are facing and which I think is under- stated in our report. I think the expenditures will be far greater than we indicate. 24 HOURS A DAY UTILIZATION OF AD]? EQUIPMENT ESSENTIAL TO MAXIMUM EFFICIENCY Mr. BROOKS. Do your studies indicate an advantage in terms of economy and efficiency of utilizing this APP equipment on a round- the-clock, 24-hour basis? Mr. CAMPBELL. This is elementary. This equipment must be used around the clock, if possible. Mr. BROOKS. In other words, anything less than 24 hours is an hour of wasted cost? Mr. CAMPBELL. That is correct. INCREASING USE OF AD]? EQUIPMENT IN GOVERNMENT Mr. BROOKS. You mentioned in your statement that the number of computer systems used in the Federal Government had increased from 414 in 1959 to 1,169 in 1963. Do you expect that this rate of growth will continue as you look back over the history of APP? Mr. CAMPBELL. I am convinced it will increase more in a geometric progression rather than arithmetic. Mr. BROOKS. You do not expect it to reach a plateau in the near future? Mr. CAMPBELL. Not in the near future. Mr. MAHONEY. For example, Mr. Chairman, we recently were re- quested to pass on a system for the Air Force. In this particular one instance it involves installation of 160 computers for use at the base level. This gives you an idea of the thinking that is going on. NEED FOR LONG-RANGE PLANNING AND FACTORS INVOLVED Mr. BROOKS. That is significant. In your Government-wide report on the development of ADP in the Federal Government you stress need PAGENO="0015" AUTOMATIC DATA PROCESSING EQUIPMENT 11 for a more positive, central planning for development of a long-range nature to promote the maximum degree of efficiency, eco~aomy, and effectiveness in the administration and management of costly APP facilities. Would you mention some of the specific factors which should be considered in development of long-range programs for the Government in use of APP equipment? Mr. MAhONEY. In addition to a short comment here, I might sug- gest that we provide you a little more information for the record on this because we feel this is very vital to the Federal Government's planning and thinking about this whole field. Mr. BRooKs. We would be glad to accept for this record a run- down on factors and elements in the consideration of a long-range planning program for Government APP utilization. Mr. MAHONEY. Just for the moment I would like to mention some of the items that were covered in a report from the Comptroller Gen- eral of the United States to the Government Operations Committee, March 27, 1962. In this letter the Comptroller General pointed out the need for more positive long-range planning throughout the Gov- ernment. The information on page 64 of this report briefly covers the fact that we were asking for active central coordination in the Federal Government to assure good procurement, good contract ad- ministration, the same thing we are talking about today. Also listed is the~ need for effective leadership in the Government to* minimize wasteful duplication of effort among individual agencies where they are working on the same kind of problems. Then to be alert to the possibilities of Government-wide integration of systems between Gov- ernment agencies. Also the need for compatability and coordination and interchange of data through magnetic tape means between the Oovernment and industry, and between Government agencies. We will furnish you a more detailed statement on this. (The material referred to follows:) STATEMENT OF THE GENERAL ACCOUNTING OFFICE ON THE SPECIFIC FACTORS To BE CONSIDERED IN THE DEVELOPMENT OF A MORE POSITIVE LONG-RANGE PLAN- NING FOR THE USE OF AUTOMATIC DATA PROCESSING EQUIPMENT IN THE FRDERAL GOVERNMENT In view of the large expenditures involved and the long-range implications of far-reaching effect on Government operations generally, we feel that more posi- tive long-range planning efforts on some kind of a Government-wide basis than have been had in the past need to be undertaken if the Government is to achieve most effiective, efficient, and economical use of these systems. Among the important problems that require Government-wide attention, for example, are the following: (1) The extent to which the Government Is equipped with the required know-how to proceed with the development ~of electronic information sys- tems in view of the costs involved and the enormous challenge presented to all levels of management. The answer to this question should, to a con- siderable degree, assist in determining the rate of growth which should be allowed or fostered. (2) The extent to which lo~ag-range planning and control should be cen- tralized in view of the potentials for development of integrated systems on a Government-wide scale. Active central coordination is needed to assure good procurement practices. There is also need for an effective central information service within the Gov- ernment so that officials at the many locations where equipment is rented will make most effective application of the contractual terms. PAGENO="0016" 12 AUTOMATIC DATA PROCESSING EQUIPMENT Effective leadership by a central agency could minimize wasteful duplication of effort among the individual agencies. At present, there is no adequate mecha- nism to prevent repetitive explorations by different agencies into the same or very similar applications which have previously been developed by other agen- cies. An effective information exchai~ge is needed to help each agency become aware of both the results of completed studies and the nature of current work in progress by other agencies. Many of the same basic problems exist at more than one location. La our June 1958 report, we commented on the unnecessary expense and dupli- cation of effort involved in multiple development of electronic systems rather than comprehensive development at a single location prior to extension of the system to other locations. No single operating agency can be expected to plan for Government-wide in- tegration of systems. Comprehensive planning in connection with significant jobs could readily involve the functions of more than one agency, and a cen- tral planning group could actively encourage early consideration of automatic interchange of records, development programs, and research data. A central group should be alert to the desirability of reorganizations if better data processing could be arranged through integration of systems. Central coordination could also provide assistance with regard to the inter- change of magnetic tape records between industry and Government. We feel that there is a great undeveloped potential in this area which needs to be more aggressively pursued on a coordinated Government-wide basis. Millions of transactions flow between industry operations and the Federal Government each year. Many of these transactions are initially recorded on magnetic tapes by industry for its own use. Automatic transcription and subsequent automatic processing of these transactions for Government purposes are now possible through the use of these tapes. Only limited interchange of data in this manner has been accomplished to date. Wage records are reported on tapes to the Social Security Administration by a small number of companies. Also, arrangements have been made for exchange of data on magnetic tapes between the Department of Defense and several private firms. Through elimination of the need for manual transcriptions of detailed records with correspondingly fewer errors and lower transcription costs, potential sav- ings in this area are large enough to warrant full exploration of the possibilities. A joint and coordinated effort in this area can significantly contribute to the de- velopment of workable programs with industry and the individual agencies to accomplish this objective. OPPORTUNITIES OFFERED FOR DEVELOPMENT OF INTEGRATED BUSINE55 An interesting and important fact is that, for the most part, electronic equip- ment systems are universal in nature; i.e., computers can be used to perform an almost unlimited variety of work for both scientific and business purposes. For example, electronic computing devices have plnyed au important role in the design and development of advanced missile systems. `First, it was necessary to develop electronic computers a~ information-processing machines to assist in the solution of problems related to development of these new weapons. Other electronic computing ~ievices were developed for use in guidance systems and were installed as Integral `parts of these `weapon systems. in turn, da~ta gen- erated by operation of the weapon system are communicated and analyzed electrcrnicall3r ~to aid in designing im'pro~ed weapons. Also, feedback data are used to provide an an~a1~sis of ~h5t is needed for `desi~n of new and ini~roved data-processing ~eqnipnient. The foregoing example of feedb'ack of `data, its 1xs~ in review slid analysis of results, and related `tise In the design of improved systems Oan be significantly related to other Government programs. For example, in buisiness-t~pe npplicalfions, `electronic Systems can be designed to provide for pueparation Of an5l3rtical reports on data trends and relationships, rates of flow, rates of change, etc., which in turn can `be useful in providing improved data-processing systems to assist ih the development of more effective management control systems. Through the use of electronic etpuipment, opportunities are offered for devel- opment of integrated systems which compare and analyze planning factors in relation to actual results of program operations. For example, in business systems, this would involve: PAGENO="0017" AUTOMATIC DATA PROCESSING EQUIPMENT 13 1. Integration of planning and operating data for the purpose of comparison and analysis of the results of operations with planned programs, with promptly prepared results upon completion of operations as feedback for management information and action. 2. Use of built-in analysis techniques which provide information to improve the system itself~ 3. Consolidation of data files and use of management-by-exception techniques in systems where closely related processes can be combined in integrated sys- tems. It must be recognized, however, that the broad objectives of integrated sys- tems must be part of a master plan in which planning for systems design is broad enough to provide for development of basic criteria for the establishment of an integrated system while at the same time providing for a gradual imple- mentation through a time-phased program. It must also be recognized that implementation of individual segments of systems without regard for master planning concepts can result in a serious and costly duplication of effort. The high cost of installing electronic systems, including the costs for systems design, programing, and operation, requires that the utmost care be exercised in planning for the acquisition and use of these systems. Many systems have been constantly changed at high cost because of poor initial planning or failure to plan for opportunities to integrate closely related procedures. Inadequate and poorly phased systems planning causes seri- ous problems in the development of electronic systems. CENTRALIZATION PO55IBILITIES Additional centralization of Government functions appears in the offing with the possibility that new and much faster large-scale electronic computer systems will serve as central processing facilities for increasingly large segments of Government operations. In this regard, consideration of how best to use this new technology on a Government-wide basis would necessarily require extensive planning to determine the proper degree of centralization of Government APP support operations which would provide the most effective and efficient use of Government resources and facilities. This could be involved, for example, in the question of what degree of centralization should be planned for such Govern- ment-wide functions as transportation management services, personnel and pay- rolling services, and supply management support programs. SAVINGS OF $1 ~ ~ MILLION A YEAR-A CONSERVATIVE ESTIMATE Mr. BRooKs. Mr. Campbell, in your 1963 report you referred to savings after an interim 5-year period of approximately $100 million per year. This stemmed, I assume, from evaluation of 523 out of the approximately 1,000 APP systems we anticipate being iii use June 30. Mr. CAMPBELL. That is correct. Mr. BROOKS. As a result, assuming that efficient, centralized man- agement you recommended in your reports on a Government-wide basis is established, together with an ever-increasing utilization of this equipment in Government, then the potential savings to the taxpayers could substantialdy exceed both the $148 million during the acquisition 5-year cperiod and the $100 million you anticipate annually thereafter; is that correct? M~r. CAMPBELL. That is correct. That is my personal view as a result of my ~experienoe. I think that is conservative. Mr. BROOKS. This pertains just to the Government, agency-operated uses? Mr. CAMPBELL. Yes, sir. Mr. BRooKs. If you include contractor-operated equipment, where the Government picks up the tab, it might well double or triple those savings, would you say? 99370-613----2 PAGENO="0018" 14 AUTOMATIC DATA PROCESSING EQUIPMENT Mr. CAMPBELL. I would be reluctant to estimate what the savings might be if we brought in the contractor operations. I do not know, Mr. Chairman. I would think it would be substantial. NEED TO EXTEND H.R. 5171 TO INCLUDE CONTRACTOR-OPERATED EQUIPMENT Mr. BROOKS. Do we have as much contractor-operated equipment as agency-operated? Mr. CAMPBELL. I do not know. Mr. MAHONEY. I might mention at this point we feel this is one of the areas that has been badly neglected because in the Government today we do not even have an inventory of what this equipment is or where it is installed. For example, if we had an emergency situa- tion, we would have to start at scratch. First, we would have to go to equipment suppliers and then, perhaps, directly to Government contractors to acquire knowledge concerning available time on these machines. We feel this is collateral to this whole study. We should know where the equipment is, we should know what dollars we are `putting in. Defense knows, for example, on an individual contract basis, It is not gathered together. This makes it extremely difficult to estimate. We feel that from our brief analysis and work we have done in this field that the figures will be very significant. We cannot come out with any specific figure on it. We feel it will be very significant. Mr. BROOKS. You feel it will be substantially larger than the say- ings stated in your report? Mr. CAMPBELL. That is our feeling. NO AGENCIES SHOULD BE EXEMPT FROM CENTRALIZED CONTROL Mr. BRooKs. Turning to the provisions in H.R. 5171, Mr. Camp- bell, do you believe that any Federal agency should be exempt from this central control provided by the bill? Mr. CAMPBELL. I would hope not. I would hope there would be no exemptions. I understand there might be cases where it would be necessary. I would like to start with the idea that there would be no exemptions. Mr. BROOKS. You think every exemption basically will be poten- tially more wastefut than inclusion under the overall program? Mr. CAMPBELL. Yes, sir. I feel that if there is an exemption, it should be made personally by the Administrator of the General Services Administration in collaboration with the President's Office. Mr. BROOKS. Generally, then, you consider the basic approach toward centralization of acquisition and management of this ADP equipment as outlined in the bill to be an acceptable means by which we could achieve this increase in economy and efficiency that you have recommended in these various reports? GSA HAS ABILITY TO WATCH OVER THIS COMPLEX PROBLEM Mr. CAMPBELL. I have a deep and abiding respect for Mr. Boutin, Administrator of the General Services Administration, and for that PAGENO="0019" AUTOMATIC DATA PROCESSING EQUIPMP~T 15 organization. I think they have the know~how and ability to watch over this whole complex problem. I do think that, in addition, they should have in this instance close consultation with the President's Office. This is how important this problem is to me. Mr. BRooKs. I haven't talked with the President about this but I have talked with Mr. O'Brien. He seemed receptive. I am hopeful that Mr. Boutin, who was appointed by the President, will be able to work very closely with him. I assume some of the experts you have, people like Mr. Mahoney, would be available to give them advice and suggestions. ADP COSTS-A FIXED CHARGE ON GOVERNMENT Mr. CAMPBELL. We are always available to GSA and to all Govern- ment agencies, for that matter, to the extent of our ability to help them. But I would point out that we are discussing here a fixed charge on the Government. This is very much like the fixed charge on the debt. What you are seeing here is growing into what many of you will see, after I am not here, will be a major fixed charge which cannot be reduced and which will probably grow, and properly so, if there is going to be control of the Government programs. You saw yesterday the enormous problem we have in just the matter of taking care of the U.S. Treasury checks. It is the kind of fixed charge we mean. Mr. BROOKS. This is a worthwhile goal to work on. Mr. CAMPBELL. Yes, sir. Mr. BRoOKs. Are there any questions, Mr. Moorhead? Mr. MOORHEAD. I would like to ask a few questions. NEED FOR CONTINUING REVIEW OF AGENCY UTILIZATION PRACTICES Mr. Campbell, I was interested in this problem you stated about these machines having to be operated 24 hours a day in order to be economical. Is there now, and the second question is, will there be, under this legislation, if enacted, any review of whether the various agencies are making full utilization of the equipment? Mr. CAMPBELL. I think, yes; I assume there would be. I think GSA would naturally make this one of their first responsibilities. Mr. M00RIIEAD. But there is no such review today; is that correct? Mr. MAHONEY. To a limited extent, the Bureau of the Budget re- cently has undertaken a program to provide information regarding available facilities throughout the Government. I think we need a very active program on this, even going much beyond what the Bureau has done so far. Of course, we are losing time every day that we do not get on top of this. Mr. MOORHEAD. There is waste there or potential savings? Mr. MAHONEY. Yes. Mr. CAMPBELL. I do not think anyone has the responsibility. That is the problem. We have to have some group that has the responsibility and whom you can call up here and discuss what is happening and how well the equipment is being managed. PAGENO="0020" 16 AUTOMATIC DATA PROCESSING EQUIPMENT CONTINUING CONGRESSIONAL REVIEW OF ADP UTILIZATION Mr. BROOKS. Under this bill, of course, we would have a continuing interest in seeing just how well the GSA was implementing this re- sponsibilit~y. I am sure GSA would work at it. Also the Appropria- tions Committee would check GSA's budgets for the revolving fund. Then, the Bureau of the Budget would have its own review of the budget requests. Also, there is the fact that the individual agencies, when they put in a request for an expenditure for the acquisition of a substantial ADP capacity, they would have to get that approved pos- sibly by their legislative committee, then by the ilbuse Appropriations Committee before they could ever request a new tier of machines from GSA as the supplier for the Government. Mr. CAMPBELL. I would think also in the initial stage GSA would have to put its stamp of approval on the agency's request. Mr. BROOKS. I guess that would be true, although it might be that they would just be able to supply the capacity required by a given agency. If the agency wanted an XYZ machine and GSA thought a DNP machine would do the job as well, GSA would be able to en- courage the agency to use this one currently available. I do not think they would have any control over what their actual requirement or request was. EQUIPMENT USED FOR TACTICAL, INTELLIGENCE, AND OTHER CLASSIFIED ACTIVITIES NOT INCLUDED IN GAO STUDY Mr. MOORHEAD. Mr. Oampbell, in your testimony you talked thout potential savings of $148 million over a 5-year period, then $100 mil- lion per year. Then on page 2 of your testimony you talk about these costs being exclusive of amounts for equipment installed for military tactical operations, intelligence, surveillance systems, and certain other classi- fled activities of the Government. Were those costs included in your projected savings of $148 million and $100 million? Mr. CAMPBELL. No. We have not gotten into classified installa- tions, NSA or CIA. Mr. MOoRHEM~. Would those costs for these classified systems be covered under this bill, H.R 5171? Mr. CA~PBMJL. Tdonotthink so. Mr. MA~ONRY. I think there was an exclusion on page 2 of the bill. Mr. BRooKs. It is contemplated that the decision as to whether or not all the Defense Department installations would be included would be a matter really for the President to decide. We were anticipating that if he thought the Defense installations should be exempted, it would be a matter for him to decide. Then, if there is an overwhelming reason as to why a given agency should have a right to go and buy whatever it pleased and to use it the way it saw fit, this would be a decision that the GSA Administrator and possibly your own o~ffice would ~be called on and the President would probably make that decision. Mr. CAMPBELL. This is one of the exemptions we discussed. PAGENO="0021" AUTOMATIC DATA PROCESSING EQUIPMENT 17 this ac nse L~ ~ent ~ry pie s reqi rements to GSA and have and install them wherever DOD wanted them. ~AD. If these activities were included in the legislation, I savings would be greater than that to which you have r. MOORTIRAD. I think we ought to be very rigid on granting exemptions. Mr. BRooKs. I think the real conception of what the Defense Depart- ment might want to exempt would not be an ordinary administrative computer capacity but possibly some highly specialized tactical com- puter operations. That would be the only thing I would think they would want to consider exempting. EQUIPMENT USED BY GOVERNMENT CONTU~AOTOR5. Mr. MOORHEAD. When you talk about the ADP equipment operated by Government contractors, are, you thinking in these cases of the special corporations like Rand and Aerospace or are you thinking much more broadly of totally independent corporations that do Gov- ernment contracting? Mr. CAMPBELL. I was thinking first of the corporations where prac- tically all of their operations are for the account of the U.S. Govern- ment. I wanted to mention those. There are a number of them. Then, of course, there are the other major contractors who do a great deal of Government work. In doing the work for u~ they have to have these installations speeifically for our j~obs. Mr. M0ORHEAD. Would not most of these be under the Defense Department or one of the services? Mr. CAMPBELL. A large part would be Defense contractors, but AEC and NASA contractors are substantial users of such equipment. Mr. MOORHEAD. Would they be exempted under this exemption of equipment necessary for national defense and security? Mr. CAMPBELL. I do not see why. The agencies would not be. Therefore, I do not see why contractor operations would be~ Mr. MOORHEAD. Thank you, Mr. Chairman. I have no further questions. Mr. BROOKS. Mr. Stinson. OAPITAL COSTS OF PURCHASING EQUIPMENT Mr. STINSON. What is the total purchase price of all the equipment that the Government would require to replace the equipment now being leased? TELL. s correct. I suspect there is some leeway ~ full knowledge of what, they are PAGENO="0022" 18 AUTOMATIC DATA PROCESSING EQUIPMENT Mr. MAHONEY. We have some figures, Mr. Congressman, but this is a changing figure from month to month. You may realize that the sales price for this equipment declines each month. Also some equip- ment is offered for sale at accelerated discounts. We calculated a tota~ that we could equate back to the 523 machines that were used here in the example in our March report. We did this to give some feeling for what dollars would be involved if the Government elected to purchase all ~;f these machines. In that case the total additional outlay for the Government in the fiscal year involved would be something in the order of $275 million for that equipment, total additional outlay for the Federal Govern- ment to acquire those 528 machines. Mr. STINSON. $275 million? Mr. MAHONEY. Additional. Mr. STINSON, We would have to spend that this year to start the system that we propose? Mr. MAHONEY~ Yes, sir. This figure changes every month because of the age of the.equipment. Mr. STINSON. How much could it fluctuate, would you say, over the year? Mr. MAHONEY. It varies by contractor. The biggest supplier reduces purchase prices by 10 percent a year, so this is a fraction of a percent a month. Also with most suppliers, we have lease-purchase options in the con- tracts that can be used to apply a percentage of rentals to the purchase price. We are building up equity in these particular cases to apply to the original sales price. It varies considerably by equipment models and it takes a good deal of calculating to come up with a precise figure. We did this for this particular set of equipment as of a few months ago, about the time our report went to press. Mr. STINSON. Our total capital outlay would be $275 million to start with? Mr. CAMPBELL. Yes, relative to these 523 machines. Mr. STINSON. Thank you. Mr. BROOKS. I might point out that, of course, it is not contemplated that they would try to buy those in one fiscal year. We do not neces- sarily have that capacity; the industry probably does not have that capacity to replace them all at one time. It would take a little time to phase them in. GSA and the Comptroller General would make a decision as to whether or not it was more advisable on a given piece of equipment to purchase it or possibly to lease it. There are some instances in which the Government might have a good lease term and it would be more advantageous to the Government to lease that machine for a short time. You are not going to go out and buy them all. You have to put a pencil to it and make the best choice. PURCHASE WHEN ADVANTAGEOUS TO GOVERNMENT Mr. MAHONEY. The basic thought in our report was that we should buy the equipment most advantageous to us at a particular point in time. Some of this equipment pays off very rapidly. In other cases PAGENO="0023" AUTOMATIC DATA PI~OCESSING EQUIPMENT 19 we have a major equity built up in the equipment today. We would want to take advantage of those initially Mr CAMPBELL The only exclusions are the intelligence and surveil lance, such as CIA and NSA perhaps Mr ROSENTHAL With regard to those exclusions, is it because the public should not know the number of machines they have or that someone should not know the type of equipment they have~ Mr. CAMPBELL. Both. Mr. ROSENTHAL. I feel rather strongly along the lines Mr. Moor- head suggested, that any exemptions should be very rigidly enforced. I think Congress is entitled to know almost everything there is. I think there has been too much classified skirt hiding, as Mr. Moss' subcommittee of this committee indicated. I, for one, would need some very compelling reason to leave in on page 2 of the bill lines 20 and 21, the statement that-the exemption of equipment for national defense and security. I would need very compelling reasons. Mr. CAMPBELL. Of course, I agree with you a hundred percent. I think the idea of classification can be overdone. It can be very dan-V gerous in many cases. We thought that where the Administrator of GSA has discretion and not the head of the agency, that we might explore these exemptions very carefully or he would explore them very carefully. Mr. ROSENTHAL. Do you think he should have that option or that the Congress in enacting this bill should have that option of where the exemptions should lie? Mr. CAMPBELL. I think if Congress had the option, it might be a lot stronger; but I do not think from an operating viewpoint it would be practical. I think he has to make these decisions on a day-to-day basis. I do not think that can be done if you had to have prior con- gressional approval. EXEMPTION OP AGENCIES Mr. ROSENTHAL. You think we should give the Administrator of GSA the prerogative to decide which agencies should be exempt under the bill? Mr. CAMPBELL. That is right with respect to the special installations we are discussing. Mr. ROSENTHAL. Those special installations you say would not apply to the Department of Defense but might apply to CIA or Mr. CAMPBELL. CIA would be one certainly. Then within Defense, NSA would be another. I do not think there is anything in AEC that would require exemption. Mr. MAHONEY. There are certain other intelligence activities in the Department of Defense. Mr. ROSENTHAL. From recent events, it seems the Department of Defense has enough trouble picking airplanes, much less computers. That sounds light. I do not mean it that way. I would need a lot more convincing before being willing to leave any exclusions in this bill at the moment. Mr. CAMPBELL. That is why we emphasized we think the Adminis- trator should be closely in touch with the President on this. That is the level at which it should be considered. I do feel that it would be PAGENO="0024" 20 AUTOMATIC DATA PROCESSING EQUIPMENT difficult for Congress to delegate authority on a day-to-day basis as the occasion arises in this particular operation. These installations may be huge and complex. Therefore, I would think that any exemption to be discussed would be not particularly public property but Congress would be aware of what was going on. Mr. ROSENTHAL. Is it that these specialized intelligence agencies, for example, have different type equipment than is used by other Government agencies, more versatility or something? Mr. MAHONEY. They have some that is of special purpose nature. They have some that is general purpose, that we would consider- Mr. ROSENTHAL. I am sure they have very specific purpose, but is the mechanical part of the machine different from that used in the commercial world or other Government agencies ~ Mr. MAHC~EY. Some equipment is quite different and some is very advanced. For example, this is not classified information. In the information retrieval area in the intelligence activities there is a great deal of developmental wGrk going on there. In a sense-I mention special purpose versus general-this is a term of the trade dealing with the hardware involved. Even the special- purpose-type equipment, such as is being developed in these informa- tion retrieval programs, can be useful in other Government activities. If, for example, CIA or someone else goes on to some more advanced stage, that equipment still can be useful other places. Your point is good. The Administrator of GSA certainly would have to be in on this at some point. I do not know exactly what the legislation will provide, what he can exclude. This is something I think your committee will have to decide. Mr. ROSENTHAL. Is it that the equipment used by these specialized agencies is more sophisticated than other equipment? Mr. MAHONEY. In some cases, yes. Mr. CAMPBELL. They use a good deal of run-of-the-mill equipment but much of this equipment is special. Mr. STINSON. Perhaps we could modify what you say to include normal or regular, routine equipment, of the nonspecialized type. Would that be acceptable to your thinking? Mr. MAHONEY, Even some specialized equipment could be used in other agencies because we have the same kinds of problems to a lesser degree. I think your problem basically is the one you still need to concern yourself with as to whether the committee wants to give the Administrator the responsibility, which we think is probably all right. Mr. BRooKs. Are there any further questions? I want to say, Mr. Campbell, you have been gracious and kind, you and Mr. Mahoney and Mr. Moore, to come down. We are grateful to have had you to testify. Counsel, did you have any comment to add to this? Mr. MooRE. No, Mr. Chairman, other than to say we will be glad to render you any assistance in drafting any changes you want. Mr. BROOKS. We appreciate the suggested changes in your report. On the matter of exemptions, I believe that it is a matter that ought to be very carefully looked into and will be a pretty high-level policy decision. The less we go into it the better off we will be, but the con- cept that we all have and share, and that was stated by the Comp- PAGENO="0025" AUTOMATIC DATA PROCESSING EQUIPMENT 21 troller General, is that essentially nothing should be exempted unless there is some real, crying security need for it. Otherwise, some other agencies, as Mr. Mahoney pointed out, might use this same equipment for 8 hours a day. We have with us now the Honorable Bernard Boutin, Adminis- trator of General Services Administration. Mr. Boutin is well known to the subcommittee and is making an enviable record for himself in the administration of the important post he holds. Before turning to specific questions, Mr. Boutin, I would like to introduce the people you have with you. I see Joe Moody, who is General Counsel; Mr. William P. Turpin, Assistant Administrator for Finance and Administration; Robert r~* Griffin, Assistant Admin- istrator. If you have a statement to make concerning H.R. 5171, we will be pleased to hear it at this time. STATEMENT OF BERNARD L BOUTIN, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION; ACCOMPANIED BY ROBERT T. GRIFFIN, ASSISTANT ADMINISTRATOR; WILLIAM P. TURPThT~ ASSISTANT ADMINISTRATOR FOR FINANCE AND ADMINISTRA- TION; AND JOE E. MOODY, GENEEAL COUNSEL Mr. B0UTIN. Mr. Chairman and members of the subcommittee, it is a pleasure as always to appear before you and your subcommittee concerning any matter in which you are interested. I am here today at your request for the purpose of expressing the views of the General Services Administration on your bill H.R. 5171 to authorize the Ad- ministrator of the General Services Administration to coordinate and otherwise provide for the economic and efficient purchase, lease, main- tenance, operation, and utilization of electronic data processing equip- ment by Federal departments and agencies. Basically, the proposed legislation would add a new section 111 to title I of the Federal Property and Administrative Services Act of 1949 (5 U.S.C. 630), as amended, so as to centralize in the General Services Administration control over all electronic data processing equipment required by Federal agencies. The bill would authorize the establishment on the books of the Treasury of an electronic data processing fund which would be avail- able without fiscal year limitation for expenses, including personal services, other costs, and the procurement by lease, purchase, transfer, or otherwise of equipment, maintenance and repair of such equipment by contract or otherwise, necessary for the efficient coordination, opera- tion, and utilization of such equipment by and for Federal agencies Original capitalization of this fund would be by appropriation ~nd trrnsfer of assets, which would be reimbursed through user changes In this connection it should be pointed out that according to the report of the Comptroller General to the Congress, dated March 6, 1963, and entitled "Study of Financial Advantages of Purchasing Over Leasing of Electronic Data Processing Equipment in the Fedex al Government," there would be very substantial savings to the Govern- ment if it purchased more of its requii ements for electronic computers instead of leasing as was the case with respect to 86 percent of Federal PAGENO="0026" 22 AUTOMATIC DATA PROCESSING EQUIPMENT requirements in fiscal year 1962. This report recites, as an example, that if 523 of the approximately 1,000 electronic data processing sys- tems installed or planned for installation by the Government on a lease basis by the end of fiscal year 1963 were purchased instead, potential savings would be about $148 million over a 5-year period and over $100 million annually thereafter. With respect to the word "electronic" we suggest that wherever it appears in the bill such word be changed to read "automatic." This change is regarded as desirable to make it absolutely clear that the proposed authority of GSA would extend to complete data processing systems which may include electronic computers as well as such related items as punchcard equipment and tabulating machines which, while as part of the system, may not technically be within the term ~`electronic." Further, we recommend elimination of the following language from the bill which appears to have been adopted from section 110 of the Federal Property and Administrative Services Act of 1949 and which has no application to automatic data processing equipment: Page 3, line 10: "less any liabilities assumed"; page 3, lines 18 and 19: "where appropriate for terminal liability charges." We construe the authority which would be vested in the Adminis- trator of General Services by the first sentence of the proposed new section 111 to "control the purchase, lease, maintenance, and use" of automatic data processing equipment by Federal agencies as broad onough to authorize the exercise of such coordination and control through the issuance of appropriate regulations applicable not only to such equipment owned or leased by and in the possession of Fed- eral agencies but also to use or services of such equipment in the pos- session of others and obtained by contract or other arrangement. Costs incurred by cost type contractors for acquisition by purchase, lease, contract, or otherwise of automatic data processing equipment or the use thereof required for the performance of such contracts, are costs which are reimbursable by Federal agencies under the terms of such contracts. This constitutes an area of indirect Government utilization of such equipment involving, so we understand, substantial cost to the United States. To remove any question as to whether the proposed authority of the Administrator of General Services to co- ordinate and control the purchase, lease, maintenance, and use of auto- matic data processing equipment encompasses such actions by cost type contractors where the expense is passed to the United States through reimbursement, it is recommended that the words "or at the expense of" be inserted in line 8, page 1 of the bill, between the words "by" and "Federal." The budgetary requirements of the General Services Administra- tion resulting from the enactment of H.R. 5171 would be increased to the extent of appropriations to the revolving fund which the bill would establish for the purchase and lease of automatic data process- ing equipment and services. Administrative and staff costs would be recovered through rental charges from the Federal agencies using the equipment owned by or leased through the revolving fund. Since 1959, Mr. Chairman, many studies have been made of the use of automatic data processing by the Federal Government and a num- ber of reports have been made on the subject. The recommendations PAGENO="0027" AUTOMATIC DATA PROCESSING EQUIPMENT 23 made in these various study reports have followed the same general pattern, calling for improved and careful planning and coordination of the efforts of Federal agencies. Many suggestions have been made for improvement of the management and utilization of automatic data processing resources throughout the Government. The Comptroller General in his report to the Congress, previously mentioned, of March 6,1963, concludes that- The only practical way in which the kind of coordinated management can be practiced to achieve the possible financial savings cited is through the estab- lishment of a small, highly placed central management office in the executive branch of the Government. The General Services Administration concurs in this conclusion of the Comptroller General. We believe that in order to achieve for the Government the full use potential of automatic data processing equip- ment, the requirements for which have shown stupendous growth dur- ing recent years, to assure full coordination of procurement by and use within the Government, and to obtain for the Government the most economical cost possible, it is essential that centralized manage- ment of and control over the procurement and utilization of all such equipment be estabilshed. We are, therefore, in complete accord with the purpose of H.R. 5171 which would accomplish these objectives. We have not sought and are not now seeking the authority which would be vested in the Administrator of General Services by the enactment of this proposed legislation. However, if the Congress should determine, as a matter of policy, that the nianagement of and control over the procurement and use of automatic data-processing equipment should be centralized in a single agency of the executive branch of the Government, it would appear that the Generat Services Administration would be the logical and appropriate agency to pro- vide such a central management function for the Government. The provision of this service for all Federal agencies by the General Serv- ices Administration would be consistent with the declared purpose of the Congress in creating this agency to provide, for the Government, an economical and efficient system for the procurement of personal property and nonpersonal services, including related services such as contracting, the utilization of available property, the disposal of sur- plus property and the management of records. The utilization of automatic data-processing equipment has become so vital to the suc- cessful performance of these and many other functions of the Govern- ment that they no longer can be successfully handled without the use of such equipment. As the volume of Government transactions required to be handled continues to grow during the ensuing years, and as automatic data- processing equipment becomes more technologically sophisticated, its potential for even greater application in the transaction of Govern- mont business affords the principal means by which the ever-increasing volume of Government business may be successfully carried out with- out proportionate increases in staff costs. At the same time, it must be recognized that Government utilization of such equipment either as owner or lessee entails substantial costs. Accordingly, in my opinion, to achieve for the Government the maximum economic benefits from the use of such equipment, it is PAGENO="0028" 24 AUTOMATIC DATA PROCESSING EQUIPMENT highly desirable that prompt action be taken to assure (1) proper economic evaluation of such equipment now in use and proposed in the future; (2) maximum utilization of all such equipment owned or leased by the United States including arrangements for multiple agency use; and (3) that the total Government requirements for such equipment is fully brought to bear, both as to price and terms, in negotiating contracts with manufacturers for its use through pur- chase, lease, or other arrangements. In my judgment, the many related purposes can best be achieved through the centralization of coordination and control of all aspects of automatic data processing in a single agency of the executive branch of the Government. In view of the foregoing, the General Services Administration wholeheartedly endorses your bill, H.R. 5171, and urges its early enactment by the Congress. This concludes my prepared statement, Mr. Chairman, but if you or members of your subcommittee have any questions you wish to ask, we shall endeavor to answer them at this time or supply the de- sired information for the record. GSA-LOGICAL AGENCY TO PERFORM CENTRAL MANAGEMENT FUNCTION Mr. BROOKS. Thank you very much, Mr. Boutin. Then you do agree, I take it, that GSA is the logical and most appropriate agency to provide this central management function that we all desire. Mr. BOUTIN. Absolutely, Mr. Chairman, for a number of reasons. GSA, from its original conception by the Hoover Commission, by the Congress of the United States, and by President Truman at that time, was to be the business service organization for the entire Federal Government. It was intended that GSA perform many of these service functions, as we do now, in buildings and procurement and supply, management of personal and real property, and records man- agement. This is the very concept of our agency. I would absolutely agree with your statement. I would like to add that we agree completely with the statement of the Comptroller Gen- eral that regardless of where this authority is placed, the whole con- cept of the bill itself in relation to the report of the Comptroller Gen- eral is eminently sound. So if this legislation were to place this proposed central management function in some other agency, we would still favor its enactment. Mr. BROOKS. You do feel that it probably ought to go to an oper- ating agency of GSA's type, do you not? Mr. BOUTIN. Absolutely. As I said, I think GSA is the logical place for this to go because of the experience we have had with revolv- ing funds, and in servicing and working with the other agencies. Mr. BROOKS. The Comptroller General was encouraging the full rapport between the President and his personal staff and the agency which would conduct this coordination. You have not been un- available when the President has called, have you? Mr. BOUTIN. Mr. Chairman, in answer to that, as you and members of the subcommittee know, the Administrator of General Services re- ports directly to the President. We do not go through any depart- merit. We go directly to the President. PAGENO="0029" AUTOMATIC DATA PEOCESSING EQUIPMENT 25 We have a close ami everyday liaison with the President and his Office. I agree with the stateirient of the Comptroller General that this is absolutely necessary. Mr. BRoows. You do not think he would be reluctant to call you and say, "Bernie, we have got to get together on this now." You would be there? Mr. BOUTIN. It is not unusual to have the telephone ring amid have the voice come on and say, "This is the President," and go right into what he has in mind. He is not bashful. GSA PRESENTLY hAS SIMILAR RESPONSIBILITIES TO TUOSE INhERENT IN ILR. 5171 Mr. BRoows. He is not. After examining provisions of H.R. 5171, would you say GSA now has maimy responsibilities that are similar in every respect to those provided in this proposal? Mr. BOUTIN. Let us look directly at the provisions of the bill itself. No. 1, the language of the legislation speaks to the point of utilization of available computers, transfer of computers, and so forth. This is the. philosophy behind the bi]L In GSA we now have a Utilization ami I)isposal Service that per- forms exactly this type function. It is in hand. No. 2, it speaks to the pomt of procurement. GSA now has Federal Supply Schedule contracts for procurement. It has know-how ami * capability without ally additional people in these areas. * In records management we have the National Archives and Records Service. Many of the responsibilities that are inherent in the legis- lation are also available, right now in General Services. Mr. Bnoomcs. Tile bill provides for a revolving fund system of fii~ ancing equipment. piircha ses. Does GSA presentily administer other revolving funds for tile acquuisition of equipment? Mr. B0ITTIN. Yes, we do. We have the Te]ecomnmunic.atious Fund ~ that was authorized last October. The chairman is familiar with that. He introduced the legislation for GSA. This is for the Federal telecommunications on the civil side of Goveriument, working closely with Defense. %~Te have the General Supply Fund, a revolving fund. We have the Buildings Management Fund for financing of rental space and for our whole Public Buildings Service operation. So we have three of these funds right now that we have had long experience with, at least with two of them. NEED FOR LONG-RANGE PLANNING Mr. BROOKS. Do you agree with tile Comptroller General as to the need for long-range planning of the Government ADP requirements? Mr. BOUTIN. There can be no question about this. If you just go back to 1953, where some of the largest manufacturers today were really just gett.ing started in a big way, the changes, the technological advances that have taken place, new applications that the Comptroller General spoke about, new opportunities to use this type equipment to great financial benefit in terms of efficiency and timeliness of service, PAGENO="0030" 26 AUTOMATIC DATA PROCESSING EQUIPMENT to the whole Ped~ral fami1y~ t~rt just immense. This whole area is going to grow. it o~t ~ we agree willi yollI~ ~ CENTRALIZED MANAGEMENT WOULD MATERIALLY ASSIST BUREAU OF THE BUDGET Mr. BRooKs. Through centralized management as provided in the' bill could GSA materially assist the Bureau of the Budget and others in the Executive Offices of the President in development `of long-range' budgetary and management policies pertaining to ADP equipment? Mr. BOUTIN. Absolutely we could. We, of course, work very closely with the Bureau of the Budget. In particular, right now, speaking of the Office of the President, we work closely' with them on matters of procurement policy. Of course, we do prescribe procurement policy now for the civil side of the Federal Government and work closely wjth the Depart- ment of Defense on the ASPR regulations. There is no question in my mind `but that this legislation lends itself to a very close working( relationship with the President, himself, and the Bureau of the Budget in formulating regulations and procedures. Mr. BROOKS. Could you assume these responsibilities in a manner so as not to diminish or compromise the traditional budgetary and the policy control of the Bureau of the Budget? Mr. BOUTIN. Yes, because, of course, the Bureau of the Budget, it- self, would have to pass on any financial request for appropriations that we would make to the Congress. So, inherent in the legislation, itself and in the procedures of the executive side of t'he Federal Gov- ernment, we go to the Bureau with fund requests, so they would have a close rein there. Then we would have to go to the Appropriations Committees of the Congress, itself. GSA ADMINISTRATOR SUGGESTS MINIMUM OF EXEMPTIONS Mr. BROOKS. On the exemption question, you heard the Comptrol ler Generai's comments on it. Do you agree with him that basically there ought to be a minimum of exemptions passed on by the Admin~ istrator, probably by and with the counsel of the President? Mr. BOUTIN. `Yes, I do completely agree with that. I would like' to point out that the Administrator of General Services-in fact, all of his top assistants-have complete and absolute clearance as far a~ any security matters are concerned. We work now with the CIA, we work with the National Security Agency, we work :with the Depart- ment of Defense in many other areas apart from APP. There very likely could occur, as the Comptroller General pointed out, certain instances where a requirement is for specifically engineered equipment that would not be the usual type of APP equipment where an exemption would be desirable. I think this ought to be adminis- tered very tightly, that the Administrator ought to be thoroughly familiar with the exact reasons for an exemption, that the Office of the President should be equally familiar with those reasons. This would not be something that would be treated lightly, at all. PAGENO="0031" AUTOMATIC DATA PROCESSING EQUIPMENT 27 Mr. BRooKs. Do you feel that this authority to delegate this respon- sibility within limits would be helpful to you during the transition period of setting up this program? Mr. BOUTIN. I do not think there can be any question about it, Mr. Chairman. I am sure you recognize and members of the subcommit- tee recognize that this is not going to be an easy job. The whole pro- gram that this bill speaks to, is not anything that will be accomplished overnight. It is going to require a great deal of research and careful planning. We do not want to make any mistakes. We do not want to go into this like a bull in a china closet. In the early stages we might conceivably want to delegate some authority on an interim basis. I would say it would be short term. PERIOD OF TIME NECESSARY TO IMPLEMENT ADP PROGRAM Mr. BRooKs. How long do you feel that it would take to fully im- plement the program on a Government-wide basis? Mr. BOUTIN. Mr. Chairman, that is a difficult question and one that I have not been able to think through completely because of the various ramifications. As the Comptroller General testified this morning, with the changes that have taken place in the art itself, with the changes in equipment, with the new opportunities for applica- tions-you say fully implement. It could be quite a long time. When you say to implement, in a reasonable sense, where we would have a good hold on exactly what the problems are, to have issued our regulations controlling the use of this equipment, and to have made a careful evaluation and analysis of financial requirements, you are probably talking of a length of time, perhaps less than 8 years. I would like to feel, Mr. Chairman, that if this bill, as I hope it will be, is passed by the Congress and approved by the President, that General Services will have the opportunity to work very closely with this subcommittee. Already the Comptroller General has testified of his willingness to work with General Services. Naturally, we will work closely with the President and the Bureau of the Budget. But I think we have to have a very close relationship, in addition, with the Appropriations Committees and with this subcomittee of Congress. I think it would be highly desirable. We ought to make a real good start on this in 1 year, so that a year from now we ought to be able to make a real significant report to this subcommittee. I also agree, with what little I know of the statistical background from reading the Comptroller General's report, that the estimates of savings are conservative, as the Comptroller General has already pointed out. ADP FUNDS-AVAILABLE WITITOUT FISCAL YEAR LIMITATION Mr. BRooKs. You can be sure of our continued interest in this )roblem. ER. 5171 provides that the automatic data-processing fund hail be available without fiscal year limitation. PAGENO="0032" 28 AUTOMATIC DATA PROCESSING EQUIPMENT Do you believe that this is necessary for the most efficient and economical administration of the program? Mr. BOUTIN. If this were not so, Mr. Chairman, I would say that the whole matter would come tumbling down. We just could not possibly administer the provisions of the bill unless it is without regard to fiscal year. Mr. BRooKs. Now, from the standpoint of officially administering the program, what safeguards do you suggest will assure continued legislative control over any expenditures for this costly equipment? Mr. BOUTIN. Mr. Chairman, I think that the safeguards are here already. As I have testified, we have the Bureau of the Budget, and its relation, as far as any financial requests are concerned, with the program of the President. We have the Government Operations Committees of the House and Senate, the watchdog committees. In addition to that there are the Appropriations Committees who hear the appropriation requests of the various using agencies, where the money has to come from, to go into the revolving fund. So I would say that we have ample safeguards right now. Mr. BRooKs. In addition to these safeguards, would it be possible for your agency, with this responsibility, to give a prospective analysis of the projected cost of this program, so that the Appropriations Committees could have some idea next year of what you are planning to expend, and what you are going to program? Mr. BouriN. Mr. Chairman, I think it goes without saying-I am sure that you know, your coming from Texas, as well or better than I do-Congressman Thomas, who is chairman of our Appropriations Subcommittee, would not let us sit across from the table from him very long unless we were able to give him a good, firm projection of financial requirements. So, definitely, this is true. We would have to be able to project the requirements from the in- formation we have at hand, for a minimum of a 5-year period. I am sure you also know that if you were to locate him on the floor of the House, or over in his office right now, he could probably tell you within a few dollars the balance of any one of our revolving funds as of this morning. So there is going to be quite a lot of safeguard and very careful evaluation. Mr. BRooKs. I fully realize you are not requestin.g directly or indi- rectly that this authority be extended to your agency, and did not know I was introducing the bill until I talked to you about it. Fur- thermore, I think there would be no question as to the difficulties which would be encountered. Obviously, some of these agencies are not going to welcome somebody suggesting that they use an available machine that will do the job, when they would like to go buy a new, fancy one that would do their job and six others that they do not need to have done. But I do not think we can overlook the importance to the taxpayers in the development of this centralized program. And with these TIMELINESS OF H.R. 5171 PAGENO="0033" AUTOMATIC DATA PROCESSING EQUIPMENr1~ 29 factors in mind, do you have any reservations insofar as GSA's ability to carry out the responsibilities outlined in H.R. 5171? Mr. BOUTIN. Mr. Chairman, I do not. And I would like to point out on that note that right now is an ideal time, in my judgment, from what I know of this entire matter, for such legislation to be intro- duced. The changes that are taking plate, not only in equipment, itself, but in methods of data transmission by wire, the opportunity of one computer center to handle a number of small agency require- ments, pooling of these requirements, all of this lends itself, I thiZik, to exactly what you, the members of this subcommittee, are looking to accomplish here, and what the Comptroller General has said must be accomplished to save this money. Mr. MOORHEAD. Mr. Chairman? Mr. BRooKs. Mr. Moorhead. AVAILABILITY OP PERSONNEL Mr. MOORHEAD. I would like to ask, Mr. Boutin, if you have in GSA at the present time personnel who are capable of analyzin these tremendously difficult machines and these difficult processes an the varying needs of this department or that department? Mr. BOUTIN. Well, let me answer the question this way, Congress- ~man No. 1, in the ADP area of GSA, itself, for our own requirements, we have about 481 people. Some of these are operators; some are pro- gramers, the whole gamut. In addition to that, we have substantial know-how in our procurement operation, where, in fact, they have already gone out to the manufacturers and have developed these schedules of costs, both for lease and purchase. So we do have substantial in-house capability right now. Mr. MOORHEAD. But you would have to get additional in-house staff of very high caliber to manage a program of this size, would you not'? Mr. BOUTIN. Well, I would like to think, Congressman, that we have people of that caliber right now. Now, how many additional people would be required, I could not tell you. It would be minimal. It may require some reassignment. Somebody may be in a certain job now we may want to reassign into a very small staff function that the Comptrollei~ General referred to. Mr. MOORHEAD. Thank you. TRADE-IN OP EQUIPMENT Mr. BROOKS. On trade-ins, Mr. Boutin, I understand that today an agency can trade in a purchased computer on a new model and receive credit against the purchase price. Now, under this program you establish, would any particular agency receive the credit under those circumstances? Mr. BOUTIN. Under the program as outlined by the bill, any trade- in would go into the revolving fund, itself, as would additional amounts of money required for the new piece of equipment come from the revolving fund. The revolving fund is the vehicle that would 99870 0-68-3 PAGENO="0034" 30 AUTOMATIC DATA PROC13~SSING EQUIPMENT handle this. But it would give us an opportunity to make an evalua- tion on a given piece of equipment that may no longer be required, or may be obsolete for the use, let us say, of HEW, that we may have an agency requiring some APP equipment right at that time that could utilize this piece of equipment that HEW does not need, with benefit to the Government. PRICE BENEFIT OF BULK PURCHASES Mr BRooKs Is the Government obtaining any price benefit today from bulk purchase or lease of APP equipment? Mr. BourrIN. That is difficult to answer, because all of this is now on schedule. Some benefit, yes. A greater benefit than large inclus- trial users would have, I doubt. I think that we can do better in our pricing, in the prices the Government receives under the provisions of this bill, where we could group our requirements together. Mr. BRooKs. Now, at this point, I would like to place in the record the copy of the Bureau of the Budget's memos on ADP equipment, dated October 14, 1961, and October 9, 1959; also, as an appendix, the Bureau of the Budget's inventory of APP equipment in the Federal Government, dated August 1969. (The memos referred to follow:) I PAGENO="0035" AUTOMATIC DATA PROCESSING EQUIPMENT 31 EXECUTIVE OFFICE OF THE PRESIDENT BUREAU OF THE BUDGET WASHINGTON 25. D.C. October 3A, 1963. CIE~JLAR NO. A~51~ TO THE HEkDB OF E~CECUTIVE DEPAR~VIENTS AND ESTABLISHMENTS SUBJECT: Policies on selection and acquisition of automatic data processing (ADP) equipment 1. Purpose. This Circular prescribes policies on (a) making selec.. tions of equipment to be acquired for use in the automatic data processing (ADP) program of the executive branch, and (b) making detereinations as to whether the ADP equipment to be acquired will be leased, purchased, or leased with an option to purchase. 2. ~ The ADP equipment affected by the policies stated herein includes: a. Electronic digital computers, irrespective of use, size, capacity, or price; b * AU peripheral or auxiliary ec~uipment used in support of electronic computers, whether or not cable-connected and whether selected and acquired with the computer or separately; c. Punched-card equipment, whether used in conjunction with or independent of an electronic computer; and d. Data transmission or communications equipment that Is selected and acquired solely or primarily for use with a configuration of ADP equipment which includes an electronic computer. Analog computers are covered only when computers of this type are being used as equipment peripheral to a digital computer. Items of ADP equipment that are (a) pbysically incorporated in a weapon, or (b) manufactured for the Government under a developmental contract, are not affected by the policIes stated herein. 3. Ai~plicability. The policies herein apply to ADP equipment acquired by the Government and to that APP equipment which is acquired and operated by Government contractors solely to prodess Government data at Government expense (e.g., Government-owned, contractor- operated facilities). These policies do not apply to APP equipment acquired by universities and. sii4lar institutions with financial assistance through grants-in-aid of Government funds. PAGENO="0036" 32 AUTOMATIC DATA PROCESSING EQUIPMENT The policy provisions of this Circular become applicable when a determination has been made that the utilization of ADP e~uipaent is essential. It is assumed that such determinations have been preceded by and are based upon the results of well-documented studies which provide an adecluate factual basis for concluding (a) that the functions or processes for which the APP equipment can be used are essential to perform, and (b) that the systems, procedures, and methods to be employed in performing these functions or processes have been designed to achieve the highest practicable degree of effectiveness with optimum efficiency arid operational econ~. Guide.. lines for planning and conducting studies preceding a decision to utilize APP equipment, for the development of system specifications, and for equipment evaluation and selection are contained in Bureau of the Budget Bulletin No. 60-6, "Automatic 1~ta Processing (ADP) Program of the Bxecutive Branch: Studies preceding the acquisition of APP equipment," dated March 18, 1960. 1~. Policies on e~nt selection. The selection of APP equipment includes the initial selection of APP eq~zipment, the selection of APP equipment additional to that on hand, the selection of APP equipment to replace APP equipment on hand, the modification of equipment on hand, usually for the purpose of increasing memory capacity, computational capability, or speed of input or output, or conibinations of the foregoing. In all these circumstances, the following policies apply: a. The selection of ADP equipment will not be made until system specifications are available to serge as a basis for selec- tion, For purposes of this Circular, the term "system specifica- tions" means (1) the delineation of the objectives which the system is intended to accomplish; (2) the data processing reqy.ire- ments underlying that accomplishment, i.e., a description of the data output and its intended uses, the data input, data files, volumes of data, processing frequencies and timing; and (3) such APP equipment capabilities as may need to be identified. System specifications will be designed to insure free competition among equipment manufacturers. b * The officials responsible for making decisions on the selection of APP equipment will assure that the selection process accords equal opportunity and appropriate consideration to all manufacturers who offer equipment capable of meeting the system specifications. In this connection, the selection process may be facilitated by written invitations to manufacturers to submit proposals as. a means for obtaining information regarding the capabilities of APP equipment to meet the system specifications. PAGENO="0037" AUTOMATIC DATA PROCESSING EQUIPMENT 33 c.. Two prime factors will be considered in the selection of equipaent: (1) its capability to fulfill the system specifications, and (2) its overall costs, in terms of acquisition, preparation for use, and operation. The term overall costs, as used in this para- graph, will be interpreted to include such cost elements as personnel, purchase price or rentals, maintenance of purŕhased equipment, site preparation and installation, programming and training. When AD? equipment of two or more manufacturers meets the system specifications, the equipment which represents the least overall cost to the Government will be selected. Factors which do not relate directly or indirectly to the capability of ADP equipment to meet system specifications or overall costs normally will not be included in the considerations unless a conclusive judgment cannot be made on the basis of the two prime factors. 5, Policies on eQu~enta~uisition. Most c~iercially available ADP equipment can be acquired by purchase or by lease, with or without an option to purchase. The General Services Administration has contracts with principal manufacturers, listed in Federal Supply Schedules (FSS), for the rental of AD? equipment. GSA currently is negotiating contracts for the purchase (including provisions for trade-in allowances) and maintenance of ADP equipment. Until ~ such time as these contracts appear on the Federal Supply Schedule, it will be necessary for departments and agencies to negotiate purchase and maintenance transactions * All `ADP equipment acquisi- tion transactions are subject to prevailing policies, laws and regulations governing procurement by Federal Government agencies. In addition, except for equipment that can be acquired by the purchase method only, the following policies are applicable: a. The method of acquiring AD? equipment will be determined after careful consideration of the relative merits of all methods available (i.e., purchase, lease, or lease-with-option-to-purchase). The method chosen will be that which offers the greatest advantage to the Government under the circumstances which pertain to each situation. In this connection, the following general guidelit~es will be taken into account: (1) The purchase method ię preferred when all of the following conditipms exist: (a) The system study which preceded the selection of' the equipment has established a reasonable expectancy that the AD? equipment under consideration can be successfully and advan.. tageousl~y used. PAGENO="0038" 34 AUTOMATIC DATA PROCESSING EQUIPMENT (b) A comparative cost analysis of the alternative methods of acquisition, of the types illustrated by Attachments A arid B, indicates that a cost advantage can be obtained by the purchase method in six years or less after the date of delivery. This analysis usually will include the following cost elements under each method: for the lease method--rental costs, including maintenance; for the purchase method--purchase costs, including purchase price, maintenance, and other one-time costs applicable only to purchase; for the lease-with-option-to-purchase method-- rental costs, and purchase costs less credits applicable upon purchase. In addition to the cost elements described above, the residual value of equipment to the Pederal Government will be considered as a factor in a comparative cost analysis. śL~rade-in allowances quoted by manufacturers may be used as a representation of the residual value. (c) The capabilities of the APP equipment will continue to be needed and will be sufficient to satisfy the system requirements, current and projected, for a period beyond the point in tic at which the purchase method begins to provide a cost advantage * The possibility that future technological advances will render the selected equipment comparatively obsolete before the cost advantage point is reached should not rule out purchase if the selected equipment is expected to be able to satisfy the system requirements. (2) The lease-with-option-to-purchase method is indicated when it is necessary or advantageous to proceed with the acquisition of the equipment that meets system specifications, but it is desir- able to defer temporarily a decision on purchase because circum- stances do not fully satisfy the conditions which would indicate purchase. This situation might arise when it is determined that a short period of operational experience is desirable to prove the validity of. a system design on which there is no previous experience, or where decisions which might substantially alter the system specifications are imminent. (3) The lease method, without option to purchase, is indicated only when it is necessary or advantageous to proceed with the acquisition of equipment that meets system specifications and it has been established conclusively that any one of the conditions under which purchase is indicated is nob attainable. b. Negotiations or renegotiations of equipment delivery dates will be conducted in a macncr which insures that firm and final commitments by the Government to accept delivery of APP equipment~ on a specific date will not be made until it has been determined through a readiness review that the using agency will be prepared to use the equipment productively, as soon as it becomes operational PAGENO="0039" AUTOMATIC DATA PEOCESSING EQUIPMENT : : .35 6. Review of curz~ent or pending lease transactions,. a. Lease or 1ease.~vith-purchase-option transactions in effect at the time this Circular is issued, and which are expected to remain in effect until fiscal year 196l~, will be reviewed in the light of the provisions of paragraph 5. If it is found to be to the advantage of the Government to purchase leased AD? equipment In this category, steps will be taken to make such purchases during the earliest fiscal year in which funds for this purpose are available to the agency. Reviews of current lease transactions should be undertaken as soon as practicable and completed by June 30, .1962. b. The method of acquisition of AD? equipment selected but not yet accepted for delivery at the time this Circular is issued will be reviewed for adherence to the policies herein stated, and,. when indicated, the basis of acquisition will be changed to conform if permitted by the terms of the contract or agreement. 7. Documentation. System studies (sometimes referred to as appli- cations studiós,~ feasibility studies, and by other terms), system specifications, and readiness reviews will be fully documented. Decisions on the selection of AD? equipment, on the method of acquisition, and on the review of the current status of the method of acquisition also will be documented to reflect adequately the considerations taken into account and the basis for the decisions. 8. Administration of policies. The head of each executive department and establishnient will establish the necessary framework of procedures, including appropriate reviews and controls, that will assure compliance with the policies herein stated. By direction of the President: DAVID B. BELL Director Attachments 2 - PAGENO="0040" ITEM OF COST COSTS BY FISCAL YEAR 1962* 1963 19613 1965 1966 1. Purchase basis: $ $ $ . $ a. Purchase costs. b. 1'~intenance, cumulative. c. Cumulative, purchase basis. 600,000 135, 000_ 613~, 000 0 90,000 690,000 0 135,OQQ 735,000 0 190.000 790,000 0 2~35, 000 813~, 000 0 300,000 900,000 2. Lease basis cumulative (including maintenances. 200,000 1300,000 6o0,ooo 800, 000 1,000,000 1,200,000 3. Purchase basis exceeds lease basis. Lease basis exceeds purchase basis. h4~, 000 ~ 290,000 -- 135,000 ~- ~- -- i~~ 10,000 1135,000 300,000 A~L'2ACflME~T A CIRCULAR NO. A-513 LEASE VS. PURCHASE REPRESENTATIVE ADP C0~tY)~BR SYSTEM BASED ON TWO.-SHIFT USE C C C * Year acquired, utilized. full year. PAGENO="0041" ATTACBME~NT B CIRCUlAR NO. A-5~ LEASE VS. LEASE-wrrn- OPTION-TO-PURCHASE REPRESENTATIVE ADP CONPTffER SYSTEM BASE) ON ONE-SHIFT USE C 0 ci ci ITEM OF COST COSTS B! FISCAL YEAR 1962* 1963 196I~ 1965 1966 1967 1. Lease basis, vith-option-to- purchase: (Option exercised at end of first year). $ $ $ $ ~ $ $ ~ a. Lease. b. Less, credit upon purchase. c * Purchase costs. d. )~intenance, cumulative. e. Cumulative, lease/option basis. 150,000 -75,000 600, 000 26,000 -- -- 0 52,000 -- -- 0 78,000 -- -- 0 108, ooo -- -- 0 138,000 -- -- 0 i68,ooo 701,000 727,000 753,000 783,000 813,000 8k,000 2. 3. Lease basis cumulative (including zr~intenance5. Lease/option exceeds lease basis. 150,000 551,000 300,000 1~27, 000 1~5O,000 303,000 600,000 183,000 750,000 63,000 900,000 -- Z~ Lease basis exceeds lease/option basis -- -- -- -- -- 57,000 * Year acc I, utilized PAGENO="0042" * 38 AUTOMATIC DATA PROCESSING EQUIPMENT EXECUTIVE OFF'ICE OF THE PRESIDENT BUREAU CF THE BUDGET WA8H$PIGTON U. 0. C. BULt~XN NO. 6O.1~ October 9, 1959 TO TEE BEADS OP FXSCUPIVE D~AR~TJ~S AID) ESTABIZSE}4ENTS SUBJECT: Automatic data processing (AD?) program of the executive branch: Definitions and. reports required 1. Purpose. This Bulletin (a) provides an initial statement of Govment.-wide~policy on the scope of the Automatic Deta Processing (AD?) program of the executive branch; (b) establishes certain uniform Al)? terns; and (e) makes provisions for executive agencies to submit the first in a series of annual reports on the utilization of automatic data processing equipment and. personnel. 2. F*~iicy on program scope and. definitions o~ terms. Pur purposes of this Bulletin, a~d as a~means f5r establishing Government..wide policy on the scope of the AD? program of the executive branch, the following definitions will apply: a. The initials "ADP" mean automatic data processing. b. The term "automatic data processing" means the processing of data with and through AD? equipment. c * The term "AD? equipment" embraces all equipment used in automatic data processing, including (1) punched card. equipment, whether used. alone or in conjunction with electronic computers; (2) electronic computers and. the several types of peripheral or auxiliary equipment which are directly involved in computer utilization; (3) data tranemi~sion systems that employ the use of devices which convey data automatically or electronically from place to place, or from equipment to equipment, for processing in an APP system; and. (1~) all other equipment not identified above which is used in automatic data processing in conjunction with puushed card equipment or electronic computers and which has not been identified. as being excluded specifically from the scope and meaning of the term "AD? equipment." PAGENO="0043" AUTOMATIC DATA P1~OCESSING EQUIPMENT 39 d. The term "AD? system" means any system for processing data which involves the use of AD? eciuipmen~t. e. The term "AD? program," when applied to the executive branch* of the Government, embraces the planning, development, administration, management, coordination, control, operation, and review and evaluation of AD? systems in all fields of AD? equipment utilization, except those fields that may hereafter be identified as being excluded specifically from the scope and meaning of the term "AD? program." For the purpose of reviewing and evaluating ADP systems and programs or determining and reporting their costs or status, the term "AD? program" also embraces all phases and steps toward acquiring and using AD? equipment, beginning with that phase which in the AD? Responsibilities Study Report, recently distributed, is referred, to as initial planning, and con.. tinuing through all subsequent phases identified in that report. AD? equipment operated by contractors solely to process Government data at Government expense is con- sidered part of the "AD? program;" however, AD? equipment acquired and operated by universities and other similar institutions, with financial assistance through grants-' in-aid of Government funds, will not be considered part of the "AD? program" of the executive branch of the Government. In anticipation of the need for excluding certain specified equip- ment and certain specified uses of AD? equipment from the scope of the AD? program, these definitions need not be construed as being fully applicable until January 1, 1960. For the intervening period, agencies may propose to the Bureau of the Budget such exclusions or revisions as they deem appropriate. On or about January 1, 1960, the Bureau of the Budget will issue revised policies' on program scope, after full con- sideration of those proposed revisions or exclusions which `were received from agencies on or before November 30, 1959. 3. Uniformity in the use of ADP terms * The terms defined in para.. graph 2 o tTis'~u~letin will `hereafter ~b~used uniformly when refer- ences are. made to the automatic data processing (AD?) program of the executive branch in lieu of other terms indicated by initials such as ED?, EDPM, EDPS and ~P. l~. Report of utilization of APP equipment. Agencies of the executivebranch will' su1~nii~t6~the Bureau ó~ ~he Budget on or before December 31, 1959, a report of APP equipment used or to be used by them, the purposes served by using the equipment, and the actual or estimated costs of operation of units of AD? equipment Data on PAGENO="0044" 40 AUTOMATIC DATA PROCESSING EQUIPMENT interagency sharing of AD]? ecjuipment also will be reported. The format for this report is shown in the attached exhibit * The cost portion (PART II) of this report will be developed in a manner which will assure that these costs can be identified with or related to the budget re~ q3lests submitted separately to the Bureau of the Budget in response to Bureau of the Budget Circular No. A-li. The report `will be submitted to the Bureau of the Budget in duplicate. Those agencies that &Ld not use AD? eqpipment during fiscal year 1959 and do not contemplate using such equipment during fiscal years 1960 and 1961 will submit a negative report. It is anticipated that the reporting requirement will be repeated annually, revised as experience demande. EI24ER B. STAATS Acting Director Attachment. PAGENO="0045" AUTOMATIC DATA PROCESSING EQUIPMENT 41 EX!~IBIT No * 1 Bulletin No. 6o~ DATA PROCESSING EQUI~NP AND PRRSON~EL - UTILIZATION REPORT FOR ~tSCAL 9,19~~L ~ AGENCY BEPORTIN~:___________________________ DATE OF REPORT: _______________________ PAiT I. USES OF AD? E~UIR~NT AD? UNIT INV0LV~D DESCRIPTION oP uss CURRENT AND PLANNED (CBosS~RE~~~RDTcE TO PART II) - Instractions for Part I: 1. 1.1st separately (a) current uses (i.e., actually ~!dentify in this in operation on 6-30..59) and (b) planned uses column, by number, (i.e., to become operational in FY 1960 or 1961). ~the ADP unit listea in Part II 2. Number uses separately and consecutively to which is involved facilitate cross-references to Part II. in each listed usej 3, Describe use fully but succinctly. 1~. Report work volume to indicate size. 5. Identify end product(s) o~ each use. 6. If use is to be discontinued during the three-year period of this report, so state.' 7. All uses will be reported unless exclusions are granted in accordance with paragraph 2 of the Bulletin to which this Exhibit is attached. The following hypothetical entries will serve as examples of entries in Part I: CURRENT UTILIZATION 1. Operation of national inventory control point for Unit #1 military personal property. uxx line items in inventory. Updated daily. xxxx line items active daily on the average. Autonm.tio print-out of (a) inventory control form, ~cocc per' n~nth; (b) pro- curement authorizations, xx~oc per menth; (c) ship- ping documents, m per menth; (d~ bills of lading, m per' nnnth; (etc.). PAGENO="0046" 42 AUTOMATIC DATA PROCESSING EQUIPMENT PA~ I. USES OF APP EQUII~ENT APP UNIT INVOLVED DESCRIPTION OF USE CURREST AND PLANNED (cROSs..R~IREScE TO PART II) YET UTILIZATION (Cont' ~) 2. (Description o~ use) Unit #1 3. (Description o~ use) Unit #2 PLANNED UTILIZATION ~. Preparation o~ paNroUs ą~or ~occc persons * Unit #1 Includes autonn~tie print..out of~ (a) earnings statemsnts, (b) leave balances, (C) personal services costs by organization, ~work program, and grade, (d) statenrnt of~ deductions, and (e) misceilaneous personnel statistical reports. Feasibility study, including systems analysis, is under vay and scheduled f~or conxpletion in second quartez' of' F~ 1960. Application scheduled to go on extsting equipment during first quarter of' F~( 1961. 5. (Description of' use) Unit #3 PAGENO="0047" AUTOMATIC DATA PROCESSING EQUIPMENT 43 AGENCY REPORTING: IDENTIFiCATiON OF ADP UNIT E. PERSONNEL UTILIZATION 1. Number of Personnel Involved In ADP Operations, End of Year 2. Number of Personnel Shifts ________ DATA PROCESSING EQUIPMENT AND PERSONNEL UTILIZATION RE~PORT FOR FISCAL YEARS 1959, 1960 and 1961 (Continued) (See definitions and 1. COST OF OPERATION OF AUTOMATIC DATA PROCESSING UNITS BASIC UNIT'(S) LOCATION: ALLATION:_________________ USES (Cross-Reference to Part I): ITEMSOF COST COSTS BY FISCAL YEAR 1959 ACTUAL 1960 ESTIMATED 1~%1 ESTIMATED A. OPERATING COSTS 1. Salaries paid during year 2. Overtime paid during year 3. Rental of Computer Equipment, prime shift. . 4. Rental of Computer Equipment, extra shift 5. Rental of Punched Card (EAM) Equipment, basic & extra - 6.Suppiies ~. 7. Contractual Services ~. . .. . .. ~-___-- ~.. ~-.-.-- 8. Total Operating Expenses (A 1 through A 7) B. CAPITAL OUTLAY (Obligations) 1. Purchase of Equipment 2. Site preparation -~ . - .3. Total Capital Outlay (Obligations) , ~. C CAPITAL OUTLAY COSTS 1. Costs Through FY 1958 . ~. 2. Costs, FY1959 3. Costs, FY 1960 (Estimated) 4. Costs, FY 1961 (Estimated) ~.. 5. Costs, FY 1962 (Estimated) 6. Costs to Complete (Estimated) PURCHASE OF SITE EQUIPMENT PREPARATION TOTAL . - . , . .~ . .. . . , . 7. Total Costs (C 1 through C 6) - D. CAPITAL OUTLAY-APPROPRiATIONS 1. Through FY 1960 ,.~ 2. Requested FY 1961 3. Needed to Complete , . . . ~. .~ . 4.~!~a! Caphal Outlay Appropriations FY 1959 FY1960 FY1961 ACTUAL ESTiMATED ESTIMATED I I PAGENO="0048" 44 AUTOMATIC DATA PROCESSING EQUIPMENT INSTRUCTIONS FOR PAI~ XI 1. For purposes of this report, an Automatic Data Peocessing (AD?) Unit ~s any organizational entity which processes data with the use of AD? equipment (see the Bulletin to which these instructions are at- tached for definition of AD? equipment). The operation of an AflP Unit: (a) includes the manual or mechanical conversion of raw data into the forms necessary for input to the data processing machinery used, e .g., input such as punched cardm, paper tape, magnetic tape, etc., but excludes the earlier steps taken to produce the raw data; (b) includes the manual and mechanical processing and use of the converted data t~ prepare end products such as more punched cards, more tapes and typed or printed reports and other docu- xnents for intended consumers, but excludes the use of these reports and documents by those consumers; (c) includes the function of progranuning and reprogranining appli- cations for ADP equipment and the systems analysis directly involved in that function, but excludes those studies of administrative. r3ystenis that may be made before the progranming function becomes applicable; (d) includes systems engineering to the extent that this function is performed for scientific and engineering applications on ADP equipment; (e) includes installation and testing of ADP equipment and exper- imental runs (debugging) of programs developed for the equipment; (f) includes the preparation of a site for ADP equipment, e.g., construction, remodeling, air conditioning, rewiring, new circuitry, etc., but excludes the cost of power and other utilities and housekeeping; (g) includes the use of data transmission systems, e.g., leased- line or Government-operated-line conmiunication networks, transceivers, radio or microwave networks, and other cornnmxxi- cation systems, to the extent that these systems are involved in automatic data processing, but excludes the use of these systems for other purposes (Note: At the option of the report~ ing agency, the empense of operating data transmission systems may be reported as a separate line item or be included in the line items provided); PAGENO="0049" AUTOMATIC DATA PROCESSING EQUIPMENT 45 (b) ~.~on: Thdj.cate city and State or c 99370 0-63-4 ~t uses (sometimes referred to as "appiicatjo~5n) by `ence ~ the numbers aPpearing in Part. I. Report the anoti~j~ of salaries paid during FY 1959 or to be paid during PY 1960 and ?Y 1961, exci.ud.. ing overtime, to persoumel engaged in data Processing Operatio~. (See inst~~0~5 for item ~IL for the types of persoumel ~ose earnings are to be reported.) Overtium paid dun ear: Report overtime paid i~ PY 1959 or to be paid in FY 19 0 and PY 1961. Rentej.s of ~ arid. 51: ~ to be paid during the three ~Lsca1 year rentals of AD? equip~~t0 PAGENO="0050" (k) Contractual services ~A7): Includes all contracts ~ aut~ii~tic ~~processing operations, such as coni gramsing, maintenance, training, use of service t_ meut studies, systems analysis, and. other costs not els~...here classified.. Contracts entered into before or in lieu of the acquisition of ADP equipment will be reported. Eatries on this line will be footnoted to indicate the types of costs and. services involved.. (NaPE: In the event operating costs are to be reported which are not applicable to those entered. in items Al through A?, agencies will ad.d. a new line identified as "(a - Other Costs" and. foot- note their reports to explain the nature of these costs (1) ç~ital outlay costs IC1 through C'T) All agencies will report in terms of cost, whŕther or not accrual systems of accounting have 1~,een adopted. Where agencies have not adopted accrual systems of accounting, estimated costs may be used. when different from obligations. (m) C~.pita1 outla~r a~prqpriations(Dl through thJ: Explain any signiflcant items of financing from other sources, e.g., another agency's appropriation. (a) Number of personnel involved. in AD? operations1 end of year ~ Include all personnel involved in data processing operations as their principal occupation, whether or not assigned. to the ADP Unit, e.g., unit chief and assistants, supervisors, programniers, systems analysts, systems engineers, eapipment operators, coders, clerks, typists, stenographers, key-punch operators, maintenance engineers. Do not include departmental and bead.quzarbers AD? staff personnel who are not directly involved in automatic data processing operations. (o) Number of ~personnel shifts (B2): Report number of 8-hour shifts per day fOr which separat& staffs are employed. Report fractions of shifts where applicable. 46 AUTOMATIC DATA PROCESSING EQUIPMENT PAGENO="0051" AUTOMATIC DATA PROCESSING EQUIPMENT 47 DATP~ PROCESSING E(~UIPM1~NT AX~D PP~RSOI~JNEL tJ~ILt~TION REPORT ~R~SCAL~EAE~S 1~9, 196O~ and~61 (Continued.) AG~JCY REP0I~]?ING:_________________________ PART III. IDLE APP E~tJI~1E~T TI~: AVAILABLE OR NEEDED (Note: This reqyiirement pertains only to intera~en!y sharing of ecj~ipment time.) 1. A1~ E~UI~2~T TTh~ AVAILA.13LE A. Identification of APP Unit invnlved: (by cross..reference to Part II). B. .Aim~unt of time available: (expressed. in hours by shift and., if necessary, by specific days or periods). C. Special conditions to be met, if any: (including such items as charges and necessary flexibility in scheduling eqnipment use). P. Specific person to contact for further negotiation: (Repeat A through D above for each APP Unit in which idle time is available for use of another agency.) 2. IDLE AD? EQUIP~T TIME NEEDED A. General description of requirement: B. Specification of type of APP equipment, when applicable: C. How much time needed and when: P. Special conditions to be met, if any: E. Specific person to contact for further negotiation: (Repeat A through E above for each requirement which necessitates separate identification.) 3, REPORT OF TRANSACTIONS INVOLVING INTERAGENCY SHARING OF APP E~tJI~T TIME, FY 1959 ~(Note: These transactions will be reported only by the agency having custody of the AD? epiipment utilized.) A. Name of agency which received the service: B. General description of the service, indicating number of hours and whether one-time or recurring: C. ~inds (to be) transferred in paysent for service: P. AD? Unit involved (cross-reference to ~rt II): (Repeat A through P above for each instance in which AD? equipment time was shared with another agency during FY 1959.) PAGENO="0052" 48 AUTOMATIC DATA PROCESSING EQUIPMENT Mr. BROOKS. I want to say, Mr. Boutin, that we appreciated having you here. NEED FOR LEGISLATION Did you have any questions, Mr. Rosenthal? Mr. ROSENTHAL. Yes. Could the purposes of this bill have been handled just as well by Executive order, by the President, rather than by legislation? Mr. BOUTIN. We could have probably gotten there under the pro- visions of the 1949 act. There would have been some questions, some legal questions. I would prefer to see it accomplished by passage of this legislation, Congressman, for a number of reasons: No. 1, it clearly identifies the interest and the intent of Congress, itself. So, then, there is no question in anyone's mind of exactly what the Congress wants to have done. No.2, it spells out the authorities very clearly and very concisely, so there is no doubt in anyone's mind there. So which is more desirable between the two? I say the legislation is substantially more desirable. Mr. ROSENTHAL. I only asked that because I suspect some of our colleagues on the floor might ask that very same question. Mr. BOUTIN. Well, you have, a great many problems if you do not have the legislation. For instance, the revolving fund and how that was going to be administered. You would probably end up with a re- quirement for some legislation anyway, clarification, authorization for revolving fund. I would say that this is the way to do it, clearly. AMOUNT OF CAPITAL IN ADP REVOLVING FUND Mr. ROSENTHAL. And, once again, can you tell us briefly why you feel there should not be any amount specified to be authorized in this legislation? Mr. B0UTIN. Well, No. 1, we do not have a fix, and I do not think anyone else has, as the Comptroller General has testified and Mr. Mahoney, on exactly the requirement there is going to be on a con- tinuing basis. What are the assets that would be transferred to GSA at the outset of it? What are going to be the requirements for replacement equip- ment? / I cite as an example of that the importance of an agency's program, itself. General Services is a very good example. In order to conform with the MILSTRIP requirements, single- line requisitioning of the Department of Defense, which became effec- tive last July 1 on a crash basis, we changed our whole concept of ADP utilization within a matter of about 5 months. This, however, is not the end that we are seeking. We are now going from that plateau into a long-range program. It would have been foolish for us to have purchased at that time. But it is prudent for us to purchase when we go into the long range. So we are going to have to take a look at the requirements of each specific agency and department in order to pinpoint exactly what the financial requirements are going to be. PAGENO="0053" AUTOMATIC DATA PROCESSING EQUIPMENT 49 Mr. ROSENTHAL. And each of these agencies-this is the part that I find a little difficult to understand-each of these agencies, would they reduce their budgetary requests accordingly, because they would not need the funds to purchase this equipment? Mr. BOtJTIN. Yes, that is absolutely true. And also their budgetary requirements would be adjusted to the user charge that they would pay to GSA, rather than the rental that they would pay the manu- facturers-whatever difference there may be in that area. You would have in one great, big pot the total financial require- ments within the framework of the revolving fund. And the only thmg the agencies would then have would be the user charge that they would pay the General Services. Mr. ROSENTHAL. The only thought I had, Mr. Chairman, is, I think, when we do prepare the report, we ought to have some financial analy- sis and anticipation of the costs of this program. Mr. BROOKS. I think we can get this in fairly good terms. Mr. B0UTIN. But it would have to be flexible, Mr. Chairman. Mr. ROSENTHAL. We might meet some opposition on the floor if we cannot logically say ~this is going to cost X. We cannot just come in with an open-end desire. Mr. BROOKS. To be fair about it, there is no way to know what HEW or what some of the given constituent agencies of the Congress are going to require. Take the Labor Department. It has a request for a certain capacity, and it is approved by the appropriate legisla- tive committees. To implement that requirement that Congress has passed, it will need a certain type of machinery. You cannot anticipate exactly what this requirement will be. That requirement would then have to be met out of the pool of equipment available to your GSA-ADP pooi. And if GSA had equip- ment that would meet that need, then GSA would issue it to the De- partment of Labor. Mr. ROSENTHAL. I am sure an analysis can be made, Mr. Chair- man, of an approximate. Mr. BROOKS. Well, we can get some figures, and we will. But, as he said, it would be flexible. We might be able to, and I would be hopeful that we could, get a pro rata saving-it is a little difficult- of purchase over lease of a given dollar input to the revolving fund. In other words, say $275 million expenditure o~ver a 5-year period would result in a $148 million saving. And we might be able to relate the input to the savings as opposed to the present and old system. Mr. STINSON. Mr. Chairman? Mr. BROOKS. Mr. Stinson. Mr. STINSON. Would you go along with the Comptroller General's figure of $275 million as the total capital outlay for providing the necessary equipment? Mr. BOUTIN. We would really have no fix on this, you see, because the Comptroller General and his staff are the ones that have done this valuation, have made this evaluation, after long months of study. And, of course, that $275 million is related to the 523 machmes So when you start looking overall, it is pretty hard to pinpoint PAGENO="0054" 50 AUTOMATIC DATA PROCESSING EQUIPMENT But I would have no doubt of the validity of the figures of the Comptroller General. We have not conducted a similar audit. We have had no opportunity, really, to do it. Mr. STINSON. Well, would it be possible to take into consideration the value of the equipment currently being used by the various agen- cies, and come up with some kind of a figure, as to the total value of the equipment? Could you do something like that? The Congress, I would think, is going to have to have some kind of assurance as to how much capital outlay is going to be required, or they are not going to go along with this program. Mr. BotrrlN. I would say, in answer to that, that it would be quite easy to come up with a figure along the lines you request from the information the Comptroller General has available right now. I would say he and his staff can come up with a pretty good fix on that, Congressman. Mr. BROOKS. We will work on that. And I would just add, as an additional thought, that, of course, if we adopt this program and continue to lease or rent, you would still have considerable savings. Purchases would be made only with justification to the Appropriations Committees. Mr. STINSON. Mr. Chairman, may I also suggest that, while we are getting some ~gures together, that we could come up with the approxi- mate number of people that would be required to implement this sav- ing. I think this would be a question that would be asked on the floor when this bill would come up. It usually is. Mr. BROOKS. We will work on that. I want to say, Mr. Boutin, that we certainly have appreciated your coming down. It would be helpful if you would furnish us with a memorandum outlining the comparable duties presently performed by the GSA to those set forth under H.R. 5171. (The memorandum~referred to follows:) In accordance with request made at the hearings on H.R. 5171 on May 28, 1963, following Is a statement outlining existing GSA activities and centralized service operations which are comparable to those proposed to be vested in GSA by H.R. 5171. This legislation would have the effect of instituting for automatic data process- ing equipment and related services, the same efficient and economical manage- ment and utilization systems envisioned for all types of property and records when the Hoover Commission recommended, and *the Congress established, the GSA. 1. CENTRALIZED PROCUREMENT AND CONTRACTING Thousands of items are contracted for by GSA under Its Federal Supply Schedule contracts against which the various Federal Agencies place orders throughout the year. Specific purchasing and contracting techniques have been developed to meet the basic ob3ectives of GSA s supply programs which are (1) continuity of supply, (2) short lead time, (3) flexibility to meet changing requirements, and (4) advantageous prices. It is our practice to utilize a method of term contracting In stores Item buying which provides a contract source against which orders may be placed as re- quirements arise. This has been advantageous to both the Government and supplier, enables GSA to minimize its inventories, and still provide rapid service. The contractor is in a position to commit raw materials, organize production schedules, avoid overtime to meet delivery schedules for large quantities, reduce the cost of production, and permits the contractor to meet Government de- PAGENO="0055" AUTOMATIC DATA PROCESSING EQUIPMENT 51 .~. livery requirements on a businesslike basis without jeopardizing commercial accounts This system has been effective with regard to most volume stock items and has produced advantageous prices as well as promoting industry confidence in doing business with the Government on a sound a~id realistic basis We have achieved a situation analogous to that which commercial firms normally establish with respect to continuing supply relationships. In other words we do business with industry on a basis to which they are accustomed a~nd need not adjust in order to deal with the Government The same term contracting method has recently been applied successfully to items delivered directly to using agencies such as appliances furniture heavy duty storage racks wire rope etc However in buying vehicles bulk paper products, and other items where close production scheduling is essential to at- tracting advantageous prices, consistent with normal industry practices definite quantity procurements are made. Term contracts are also utilized in connection with the Federal Supply Schedules program where using agencies place orders directly against contracts made by GSA These contracts take full advantage of i.ndustry distribution systems in meeting Government supply needs and minimize the necessity for Government distribution of the items involved. Here, again, the Government is doing business with industry on the same basis as industry does business with its other customers. Adequate provision is made for using agencies to make direct purchases for emergency needs. Taken on a total basis, approximately 80 percent of GSA's buying prograrn.s provide for direct delivery from the supplier to use point. This has resulted from a policy of designing our programs to make items available at the point of use when needed at the lowest overall cost to the Government, utilizing industry distribution to the maximum extent feasible and not undertaking distribution through Government warehouse system unless overall advantages will accrue. Motor vehicles, office furniture and furnishings, typewriters, aaid automatic data processing equipment, and related maintenance services are examples of items covered by the FSS schedules. The centralized procurement of APP' equipment envisioned by H.R. 5171 would be consistent with the foregoing func- tions &nd should produce further economies to the Government through "bulk" buying. 2. CENTRALIZED SERVICES FOR OTHER AGENCIES The authority which H.E. 5171 would vest in GSA is similar to several other existing GSA activities: (a) E~uppl~y di$tribution system. GSA stores and distributes to other agencies thousands of line Items oct supply. Its supply distribution complex includes 46 depots, annexes, and retail stores.. The operation is financed through a General Supply Fund (revolving) which, last year did $446.9 million in business. (b) Motor pool The GSA interagency motor pooi is an example of an equipment pool provided for use of Federal agencies by GSA. In fiscal year 1962, the motor pool provided 24359 vehicles which traveled 249 mIllion miles During the past 6 years the average utilization per vehicle year increased from 7907 to 11 684 miles while the cost per mile decreased from 11.7 to 7.7 cents during the same period. (c) Printing and reproduction As authorized by the Joint Committee on Printing, GSA operates six field printing and duplicating plants for use by other Federal agencies as well as by GSA activities. (4) Telecommunications Telecommunications service for the Federal agencies Is provided by GSA through the Federal Telecommunication System. The objective of FTS is to provide a unified system of day-to-day and emergency communications services for all Federal civilian agencies, compatible with military systems. The scope of the system encompasses all civilian agency telecommunications system plan- ning, engineering, management, and operation of facilities and services. Telephone, teletypewriter, data transmission, facsimile, and all forms of com- munications services necessary for Federal civilian agencies will be provided largely through utilization of the facilities of common carriers. Centralized PAGENO="0056" 52 AUTOMATIC DATA PROCESSING EQUIPMENT procurement of facilities and consolidation of services are prime considerations in realizing requirements of the system Significant improvements in service and savings have already resulted. Dur- ing fiscal year 1962 consolidated switchboards in 85 cities served 9 percent more main and extension lines than in fiscal year 1961 with an inciease of less than 4 percent in operating positions The first stage of a nationwide direct distance dialing system was Initiated on February 15, of this year, connecting 43 major cities in the United States. GSA s consolidation of various teletypewriter networks formerly operated by civil agencies resulted in an annual savings of $1 8 million over commercial communication rates. Further savings in this area may be anticipated as the requirements for high speed data transmission facilities increase and the planned GSA Advanced Records System is installed. Central procurement of leased mtercity communication lines are resulting in saving's estimated at $7 million per year to the Federal agencies. 3. CENTRALIZED MANAGEMENT ACTIVITIES (a) Property ineentories GSA is now taking and publishing annually, or as required, inventories of property including (1) real property owned by the Government, (2) real property leased by the Government, (3) annual motor vehicle report, (4) jurisdictional status of real property, and (5) water pollution facilities. More recently we began compilation and publication of the annual inventory of ADP equipment in Government. (b) ~upplysnanagesnent surveys As a regular practice, GSA staff assists other agencies in establishing and maintaining efficient supply management systems. Many surveys have been made of other agency activities and the recommendations made by GSA have resulted in substantiai economies to the Government. (o) Bwildings and spaCe management GSA is providing space to all Federal agencies in existing Federal buildings, through construction of new buildings, or through centralized leasing of space. This centralization of procurement of space and related services, and the con- trol of space utilization by GSA is saving the Government many millions of dol- lars annually. Executive Order 11035 issued by the President last July strength~ ened GSA's authority in this area. GSA is already providing specially designed space and safety features required for Federal Government computer installations and promulgating protection, environment, and safety regulations that will avoid some of the costly fires and other disasters which have occurred in the past. (d) Utilization and disposal of ea'cess and surplus property Through the Utilization and Disposal Service, GSA promotes the maximum possible use of excess personal and real property by Federal agencies, and pro- vides for the rehabilitation of personal property owned by the Government to extend its useful life. We also arrange for the utilization of available excess personal property by the Federal agencies and arrange for the sale of items to the public when there is no longer a demand by the Federal agencies for such items. Computers and other APP equipment purchased by the Federal agencies and no longer required already come to this Service for screening and disposition. While only a few computers have been declared excess to date, we are presently in the process of developing a special regulation governing the procedures for reporting excess to GSA and making these computers a first source of supply for agencies in the market for APP equipment. (e) Records management The National Archives and Records Service has provided substantial guidance and assistance to the Federal agencies In the analysis of paperwork manage- ment problems and the development and Installation of improved procedures and methods. It also provides a very effective source data automation develops ment and training program to encourage the use of integrated data processing techniques. PAGENO="0057" acid, Mr. PAGENO="0058" PAGENO="0059" APPENDIXES APPENDIX I REPORT TO THE CONGRESS OF THE UNITED SPATES, STUDY OF FINANCIAL ADVANTAGES OF PURCHASING OVER LEASING OF ELEC- TRONIC DATA-PROCESSING EQUIPMENT IN THE FEDERAL GOVERN- MENT BY THE COMPTROLLER GENERAL O]~ THE UNITED STATES MARCH 1963 CoMPmoInm Gmma~i4 OF THE UNIrnu STATES, Washington, March 6, 1963, B-115369. To the President of the $enate and the $peaker of the House of Representatives: Herewith for the information of the Congress is the report on our study of the relative financial advantages of purchasing over leasing of electronic data proc- essing equipment in the Federal Government. The Federal Government is a large user of data. processing equipment in its operations, but most of the equipment is leased. Of a total of 1,006 electronic computers installed in the Government at June 30, 1962, 867, or 86 percent, were leased. Rental payments' for the fiscal year 1962 on such equipment were about $145 million. These statistics exclude equipment used in certain classified mili- tary, intelligence, and surveillance operations. Our study shows that very substantial amounts of money could be saved if the Federal Government purchased more of its data processing equipment needs. he detailed cost comparisons of 16 different electronic machine models, which constituted the principal part of our study, indicate potential savings of about $148 million over a 5-year period. These significant possible savings apply to only 523 of approximately 1,000 electronic data processing systems installed or planned for installation on a lease basis by June 30, 1963. For additional use of the 523 machines after 5 years, there would be further savings at the rate of over $100 million annually. We believe that to fully realize savings of such magnitude basic changes in the Government's overall management system will be necessary. Decisions as to the financial advantages of purchasing will have to be made from the standpoint `of the Government as a whole, and not primarily from the standpoint of mdi- vicTual using agencies as has been the practice in the past. In addition, more at- tention needs to be given to obtaining more complete utilization of the equip- ment acquired. We believe that the only practicable way in which the kind of coordinated management can be practiced to achieve the possible financial savings cited is through the establishment of a small, highly placed Central Management Office in the executive branch of the Government. Accordingly, we are recom- mending to the President of the United States that he establish, such an Office in his organization. The report also contains a general recommendation to the heads of all using departments and agencies that they arrange for a prompt and complete reap- praisal of their current plans to lease data processing equipment and tkke such actloi~ as is possible to realize the financial savings that may hO available from purchasing such equipment and fully utilizing it. Copies of this report are being s.ent to the President of the United States, to the Director, Bureau of the Budget, and to the heads of all departments and agencies that use electronic data processing equipment. JOSEPH CAMPBELL, Comptroller General of the United Eitates 55 PAGENO="0060" 56 INTRODTJOTION In the period of a little over 10 years sinc - the introducta ie first g~1 purpose electronic computer at t~ the Census - - - Commerce, the use of electronic co out the Federal Government. Thi Government operations and for *As of June 30, 1962, there we: installed in Federe1 `~`~ were leased and ~" had been purchased by t ments for the use of leased equipment were approximately fiscal year 1962. The General Accounting Office has made a study of the relative financial advantages of purchasing the electronic data processing (EDP) equipment used by the Federal Government over the practice of leasing such equipment. This study was prompted in the first instance by the Subcommittee on Census and Government Statistics of the Committee on Post Office and Civil Service, House of Representatives, which conducted hearings in 1959 on the use of electronic data processing equipment in the Federal Government. At that time, members of the subcommittee raised a question as to the economic aspects of the apparently predominant pracitce in the Federal Government of leasing electronic data processing equipment rather than purchasing it. The suggestion was made that the General Accounting Office and the Bureau of the Budget inquire into this policy. Other congressional committees have also ex- pressed interest in this problem. Federal agency policies and practices in the procurement of EDP equipment were studied by both our Office and the Bureau of the Budget. On August 26, 1960, and November 8, 1961, our Office submitted to the subcommittee two short reports on the results of these joint studies. The second of these reports trans- mitted a copy of Bureau of the Budget circular No. A-54, which had been issued in October 1961, to prescribe policies on selection and acquisition of automatic data processing equipment to be observed by Federal agencies and contractors operating Government-owned facilities. These reports and the circular A-54 summarize the principal factors requiring consideration in management deci- sions as to the method of acquiring ADP equipment and are accordingly included in this report as appendix I. In the meantime, the General Accounting Office undertook a more comprehen- sive study of the relative financial advantages of the two basic methods of procuring the use of EDP equipment, and the results of this extended work is the subject of this report. The principal part of our additional study consisted of selecting 18 electronic data processing system models, which we consider to be generally representa- tive, and computing the comparative costs over a 5-year period of use of such machines by leasing and by purchasing. The factors considered in making these computations are described on pages 15 to 18, and the results of these computations are summarized in exhibits A, B, and C. During this study, we also reviewed selected instances as to individual Federal agency action on price reductions announced by manufacturers for the purchase of data processing equipment. SUMMA1IY or CoNcLusIoNs AND RECOMM~E:NDATION The cost comparisons made in our study demonstrate that very substantial amounts of money can be saved by the Federal Government in the years to come if, in acquiring the use of needed data processing equipment, proper cost comparisons are made in advance, action is taken to purchase equipment when such comparisons indicate the financial advantage of such action, and effective procedures exist to obtain the fullest, practicable utilization of such equipment by Government agencies. 1 Electronic data processing machines estimated to be installed In Federal Government operations, exclusive of those used for military tactical operations, intelligence, sur- veillance systems, and certain other military programs. The source of these statistics Is the "Inventory of Automatic Data-Processing (ADP) Equipment in the Federal Govern- ment" published by the Bureau of the Budget, August 1962. AUTOMATIC DATA PROCESSING EQUIPMENT ~tronic I r, or GENERAL scora OF STUDY PAGENO="0061" AUTOMATIC DATA PROCESSING EQUIPMENT 57 The cost comparisons with respect to 16 of the 18 machine models studied during our review indicate potential savings of approximately $148 million over a 5-year period (see exhibit A). The 16 different electronic machine models used for our study represent 523 of the approximateLy 1,000 electronic data processing systems installed or planned for Installation on a lease basis by June 30, 1963. For additional use of the 523 machines after 5 years, there would be further savings at the rate of over $100 million annually. The general conclusions which we have reached on the basis of our study are as follows: 1. If possible and substantial savings are to be fully realized, management decisions as to whether data processing equipment should be purchased or leased should be made from the standpoint of advantage to the Government as a whole and not from the standpoint of the individual using agencies. 2. Because of the substantial savings that may be available, all decisions to acquire the use of data processing equipment should be supported by specific computations showing the comparative costs of acquiring by lease and by purchase. 3. Where purchasing is financially advantageous, the realizable savings increase in proportion with the increase in utilization of the machines. 4. The savings possible through purchasing are more pronounced for the larger and more complex machine systems. 5. While significant savings may be realizable in many instances through purchasing rather than leasing, for some types of electromechanical equipment, it is more advantageous financially to lease rather than to purchase. With the present system of decentralized management in the Federal Gov- ernment under which each agency makes its own decisions as to whether the u~e of data processing equipment should be acquired by lease or by purchase, there is no effective coordinating machinery at work to give consideration to these alternatives from the standpoint of benefit to the Government as a whole. Because of the very substantial financial savings that can be realized through more extensive purchasing of such equipment and the related need for directing and coordinating its utilization throughout the Government, we are recom- mending to the President of the United States that a central management office suitably empowered to perform these functions be established in his organiza- tion. We are convinced that the establishment of such an office is the only practicable way to provide the kind of management that will make possible the realization of savings of hundreds of millions of dollars in the years to come. ExPANDING USE OF ELEcTEoNIc DATA PROCESSING SYSTEMS IN THE FEDERAL GOVERNMENT In our report to the Congress on "Review of Automatic Data Processing De- velopments in the Federal Government" (B-115369, Dec. 30, 1960), we stated that there had been a continuous, upward trend in both the quantity and com- plexity of electronic data processing equipment being used in Government operations. This trend continues. New areas of computer use are being pioneered in such fields as automatic retrieval of information and in communi- cation systems where electronic computers seem destined to play an increas- ing role. Also, the application of many new scientific management techniques depends on computers to process the enormous number of calculations that are required to carry out such advanced techniques. EVOLUTION OF EQUIPMENT During fiscal year 1960, Federal agencies began receiving deliveries of the more advanced solid-state equipment. This new equipment was brought about through `the development of the transistor and other solid-state devices which are used in place of the vacuum tube found in earlier computer models. Tran- sistors are but a fraction of the size of vacuum tubes, require less power, generate less heat, and are generally more reliable. The diminutive size of transistors has led to miniaturization of circuitry so that whole circuits can be placed on small card forms. In contrast to the vacuum tube systems, the solid-state systems are more compact, require less floor space and reinforced flooring, require less special power and air-conditioning facilities, are more easily maintained, and operate at faster speeds and with greater versatility. PAGENO="0062" 58 AUTOMATIC DATA PROCESSING EQUIPMENT Today, suppliers offer a broad range of solid-state equipment that can be ap- plied to many operations throughout Government, as well as business and Industry. NUMBER OF SYSTEMS IN USE OR PLANNED For the past several years, the Bureau of the Budget has published an In- ventory report setting forth statistics on the Federal Government's use of automatic data-processing equipment. These reports are based on data sub- mitted by all Federal agencies. They exclude information on data-processing systems used for military tactical operations, Intelligence, surveillance systems, and certain other military programs. Statistics on electronic systems set forth In these reports show: At June 30 Number of systems Number leased Number purchased Percent purchased 1960 (actual) 1961 (actual) . 531 730 1,006 1,169 433 613 867 1,006 98 117 139 163 18.5 16.0 13.8 13.9 1962 (estimated) . 1963 (projected) . THE PRACTICE OF LEASING The Federal Government's practice of leasing data-processing equipment originated prior to the development of electronic computers, at a time when mechanized data-processing systems consisted primarily of electric accounting machines (EAM). Most of these machines were supplied by the International Business Machines Corp. (IBM), whose policy was to lease rather than to sell this type of equipment. In view of this policy, as well as certain conditions considered to be of a monopolistic nature, the Attorney General of the United States, on January 21, 1952, entered a complaint against this company in the Dis- trict Court of the United States for the Southern District of New York, charging violations of sections 1 and 2 of the "act to protect trade and commerce against unlawful restraints and monopolies" (commonly known as the Sherman Antitrust Act). Final judgment was, filed and entered in a consent decree 4 years later on January 25, 1956, by which time IBM was also manufacturing electronic data- processing equipment. Among other provisions, the judgment provided that IBM offer data-processing equipment for sale as well as for lease. In accord- ance with this decree, IBM has since offered its equipment for lease or for sale. This change In policy did not have any immediate effect on the practice of Government agencies of leasing this kind of equipment, and it has not subse- quently had any material effect on the practice. For example, at the present time, more than 7 years after the equipment was offered for sale, most EAM equipment manufactured by IBM is leased and, of the 670 EDP machines manu- factured by IBM and reported to be on hand at the close of fiscal year 1962, only 37, or 6 percent, had been purchased. In addition to the International Business Machines Corp., about 20 other manufacturers supply the Government with electronic data-processing equip- ment. All of these manufacturers offer equipment on a purchase as well as on a lease basis. The following tabulation lists the manufacturers furnishing such equipment to the Federal Government as of June 30, 1962, and shows the total number of systems in use, the number leased and purchased, and the percentage the purchased systems bear to the total flumber of systems. This information is summarized from the "Inventory of Automatic Data-Processing Equipment In the Federal Government," published by the Bureau of the Budget, August 1962. PAGENO="0063" The following tabulation shows as of the close of fiscal year 1962 the num- ber of computer systems used by each department or agency the number leased the number purchased and the percentage those purchased bear to the total Department or agency ~ Number of computer systems Number leased Number purchased Percentage purchased ~ Department of Defense: c)mce of the Secretary Department of the Air Force Department of the Army Department of the Navy 27 263 158 178 26 244 133 151 . 1 19 25 27 4.0 7.0 16.0 15.0 Total Atomic Energy Commission National Aeronautics and Space Administra. tibn Department of the Treasury Department of Commerce Department of Eealth, Education, and Wel- fare 626 112 83 34 29 28 15 15 13 10 9 8 24 554 72 76 72 40 7 32 0 36.0 8.0 20 28 13 12 13 10 8 6 21 9 31 0 .~. Department of Agriculture Federal Aviation Agency Post Office Department General Services Administration 2 3 13.0 20.0 1 2 3 11.0 25 0 13.0 Veterans' Administration Department of the Interior Allothers Total 1,006 867 139 13.8 AUTOMATIC DATA PROCESSING EQUIPMENT Manufacturer 59 Total Number number leased of systems Number Percentage purchased purchased .~i Aviation, Inc. - 36 37 28 670 2 24 11 5 6 42 64 37 15 26 23 20 6 633 12 9 4 6 40 48 27 1 10 14 S 7 I 3 37 12 2 1 2 16 10 11 oI~ - - ) - a Corp. tric Products, ~ 100.0 28.0 38.~0 29.0 100.0 100.0 75.0 6. O 50.0 18.0 20.0 5.0 25.0 27.0 100.0 1,006 1 Manutacturers that furnish computer systems built specifically for a particular application. Generally they are not easily adapted to other applications. 867 139 13.8 INCREASED ~SE OF ELECTRONIC DATA PROCESSING SYSTEMS PAGENO="0064" 60 AUTOMATIC DATA PROCESSING EQUIPMENT BUREAU OF THE BUDGET CIRCULAR NO. A-54 After studying the various factors affecting lease-purchase decisions, the Bureau of the Budget issued Circular No. A-54, in October 1961, prescribing policies to be observed by Federal agencies in acquiring APP equipment. This circular requires that agencies use a 6-year factor in ascertaining which method is most favorable from the standpoint of expenditures. In other words, if rental charges over a .6-year period exceed purchase and related maintenance costs, the decision to purchase should be made. Normally, most systems would be purchased under this policy. However, the application of the policy is dependent upon the user's having a continued need for the particular equipment throughout the 6-year period. If a user anticipates changes in data processing requirements which might necessitate equipment changes prior to the expiration of the amor- tization period, he need not purchase. As indicated by the statistics on computers in use or planned (see p. 7), the Bureau's circular has apparently had little effect so far on lease-purchase deci- sions by individual agencies. LIMITED PERSPECTIVE USED IN DETERMINING THE USEFULNESS or DATA PROCESSING EQUIPMENT TO THE GOVERNMENT With more than 1,000 systems now in use (exclusive of certain military tac- tical, intelligence, and surveillance systems), the Federal Government is the world's largest user of electronic data processing equipment. For the most part, the equipment is general purpose in nature; that is, it can be used to perform numerous different kinds of tasks once programed to do so. Because of the wide variety of Government equipment needs, most equipment Installed can be considered to be useful to the extent that, if purchased and no longer needed for its originally intended purpose, it can be placed in use for other purposes in other activities. Government applications range from critical scientific and defense operations to many less demanding administrative functions. In making lease versus pur- chase determinations, each Federal agency considers only the various factors involved from its own standpoint, and this practice has had much to do with the fact that 86 percent of the systems now in use are leased. If, however, the usefulness of equipment is considered from the standpoint of advantage to the Government as a whole, including consideration of use for subsequent or less demanding tasks as well as for the primary or originally intended purposes, the economic advantage of purchasing becomes more evident. Had this viewpoint been used in making lease versus purchase decisions in the past and if an effective procedure had existed for transferring equipment within the Government, the fears of a loss of flexibility through purchasing, which has to some extent influenced individual agency decisions to lease, should have been overcome. In some cases, because of defense or other critical national needs, it is neces- sary to use the latest models of equipment. However, most EDP equipment is general purpose in nature and it could fulfill data processing. needs in less demanding areas for a number of years after it has outlived its usefulness for the original task. ECONOMIC OBSOLESCENCE VERSUS TECHNOLOGICAL OBSOLESCENCE Development of new equipment has been so rapid that much electronic equip- ment is technologically surpassed by more advanced models by the time it is installed. However, from an economic point of view, considering overall Gov- ernment needs, most equipment can be considered as having a useful life of at least 5 years. The physical life of such equipment may extend well beyond a 5-year period after which maintenance and upkeep charaes bečome the main cost factors to be considered. If the originally installed equipment can be pro- ductively and satisfactorily used at a lower cost than newly developed equip- ment, it would seem that, unless timeliness of data processing or some other feature becomes the overriding factor, the older equipment should be retained in use until the cost advantage favors conversion to the technically superior equipment. PAGENO="0065" AUTOMATIC DATA PROCESSING EQUIPMENT 61 DETAILED COST COMPARISONS During our study, we selected 18 electronic data processing models and deter- mined for each component the costs of leasing, purchasing, and maintenance and the interest applicable to these costs, For each component, we then compared the total cost of rental over a 5-year period with the cost of outright purchase plus the cost of maintenance. All comparisons were made for one-, two-, and three-shift operations. These comparisons are summarized in exhibit B and are set forth in detail for each machine system in exhibit C. A condensed summary of the results of these comparisons is shown below. Manufacturer International Business Machines Corp Philco Corp International Business Machines Corp Control Data Corp Minneapolis-Honeywell Regulator Co Burroughs Corp Univac, Division of Sperry Rand Corp International Business Machines Corp The National Cash Register Co International Business Machines Corp Univac, Division of Sperry Rand Corp Minneapolis-Honeywell Regulator Co International Business Machines Corp Do Do Control Data Corp System identifl- cation Savings or losses (-) from purchasing instead of leasing 1 shift 2 shifts 3 shifts 7090 2000 7080 1604 800 5000 Univac-11L 7070 315 1410 Univac SS-90. 400 1401 1 14012 1401 3 160A 176 hours $644, 000 -143,000 333,000 923,000 112,000 315,000 -15,000 70,000 38,000 67,000 -21,000 23,000 27,000 7,000 -11,000 24,000 86$ hours $2, 184,000 1, 181,000 1,397,000 1,830,000 673,000 886,000 276,000 432,000 83,000 323,000 149,000 171,000 158,000 137,000 41,000 75,000 588 hours $3, 724,000 2,505,000 2,461,000 2,737000 1,233,000 1,456,000 566,000 795,000 143,000 579,000 335,000 318,000 288,000 267,000 94,000 127,000 Radio Corp. of America Do 501 301 $00 hours 80,000 26,000 ~84 hours 42,000 18,000 61$ hours 45,000 23,000 I Card and tape system operated as offline equipment to a larger system. 2 Card and tape system. 3 Card system. FACTORS CONSIDERED IN MAKING COST COMPARISONS The factors considered in our computations were: Time period: Five years. Lease: Rentals and interest on rentals. Purchase: Purchase price, interest on purchase price, maintenance costs, and interest on maintenance costs. These factors are described more fully in the following sections. Other costs related to the acquisition and use of data processing systems, such as transporta- tion, site preparation, and training costs, are identical under either lease or purchase arrangements and consequently for comparison purposes can be ex- cluded. Five-year period Federal Government experience with electronic data processing devices over the past 12 years has shown that with proper maintenance this type of equip- ment has a useful lifespan of at least 5 to 10 years. Some of the machines in- stalled in Federal agencies in the early and mid-1950's are still in service. Gen- erally speaking the older machines that are still in use are those which were purchased outright by the Government. Also, despite the rapid changes that have taken place in equipment design, a large number of machines that were rented were used for periods of 5 years or more before being replaced by modern equipment. It is generally agreed that the new "second generation" solid-state machines will have a considerably longer useful life than the "first generation" vacuum tube type of machines. The question of economic obsolescence versus tech- nological obsolescence related to the useful life of electronic equipment is dia- cussed briefly on page 13. 99370 O-~63----5 PAGENO="0066" 62 AuTOMATIC DATA PROCESSING EQTJIPMENT We selected 5 years as being a conservative estimate of the economic useful life of electronic data processing machines for purposes of making compari- sons of lease costs with purchase costs. It should be noted that to the extent that this period is less than the actual useful life of the equipment, the com- puted savings are understated. Rč~ntala Each year since fiscal year 1958, the General Services Administration on be- half of the Federal Government has entered into contracts with equipment sup- pliers for the rental of EDP equipment. In fiscal year 1962, 17 rental contracts were in effect. Through January 15, 1963, 16 contracts had been written cov- ering fiscal year 1963. Basically these contracts are concerned with rental rates and the terms and conditions that bear upon the application of these rates. The rates are estab- lished by the supplier and are the same as those charged commercial users of this equipment. These rates are accepted by the General Services Administra- tion for use through the Government without further negotiation. The terms and conditions, however, are negotiated. The rental rates appearing In these contracts for use of equipment are the rates used in our computations. Purchase price For fiscal year 1962, for the first time, two of these contracts contained pur- chase and maintenance sections as well as sections on rental arrangements. In fiscal year 1963, 14 contracts containing purchase sections and 13 containing maintenance sections had been written through January 15, 1963. As in the case of rental prices, purchase prices are set by the suppliers and are not fur- ther negotiated by the General Services Administration. Terms and condi- tions relating to purchasing are, however, negotiated. Where purchase contracts had been established, the contract prices were used in our computations. In those cases where no purchase contract was in effect, purchase price information was obtained directly from the supplier. Purchase price data used in our computations relate to new equipment. Most installed equipment is offered for sale to users at reduced prices, usually depend- ing on the length of time that the equipment has been installed. On the other hand, in almost all eases, rental prices do not decrease with the aging of the equipment. To the extent that used equipment was included in our determina- tions of projected savings, the cost of purchasing is overstated and estimated savings from purchasing are understated. Maintenance costs As mentioned previously, contracts providing for the maintenance of purchased equipment have been written with equipment suppliers for fiscal years 1962 and 1963. For these contracts, as for the rental and purchase contracts, rates pro- posed by the suppliers are accepted and the terms and conditions are negotiated. Interest It is our position that interest is a cost which is related to all Government expenditures. In our calculations of applicable interest costs, we used the average rate of marketable obligations of the outstanding public debt as of December 31, 1961 (3.146 percent). SIGNIFIOANCE OF COMPUTED SAVINGS ON INDIVIDUAL SYSTEMS As indicated in the condensed summary on page 14, 14 of the 18 systems com- pared for the 5-year base period show a purchase advantage on a one-shift basis. All 18 systems show a purchase advantage on a two- and three-shift basis. These comparisons show clearly that purchase, rather than lease, of electronic data processing equipment can result in substantial savings. Some widely used models of electronic data processing equipment offer the greatest purchase ad~ vantages. For example, the purchase of a representative IBM 7090 system could result in savings of $644,000 if operated on a one-shift basis, $2.184,000 if operated on a full two-shift basis, and $3.724M00 if operated on a three-shift basis. Con- tinued use of the system past the 5-year period would prrduce additional savings of from $772,000 to $1,512,000 annually depending upon the extent of use. (These additional savings are measured by equipment rentals not paid less estimated maintenance costs.) PAGENO="0067" AUTOMATIC DATA PROCESSING EQUIPMENT 63 According to the inventory of automatic data processing equipment in the Federal Government, issued by the Bureau of the Budget In August 1962, there will be 42 IBM 7090 and 7094 systems In use by June 1963. Of these, 6 are to be purchased and 36 are to be leased. To illustrate the magnitude of savings available through purchasing, the following tabulation projects the estimated amount of savings that could be realized over a 5-year period for the 36 systems if they were purchased rather than leased and the estimated amount of annual savings for each year of continued use beyond the initial 5 years. These pro- jected savings are based on the computed savings applicable to the representative IBM 7090 system shown in exhibit C and on the planned use per month as re- ported by the respective agencies to the Bureau of the Budget. Estimated savings available to the Government through purchasing 3 IBM 7090 and 7094 systems scheduled to be leased by June 30, 1963 Agency Location Use per mouth Shift Hours equi"- Estimated savings over 5-year period available Estimated annual savings after alent through purchase initial 5-year period Atomic Energy Comniission~~ Do - Do Do Do Department of Commerce Do Do Do Do Department of the Air Force Do Do Do Do Do Do Department of the Army Do - Do Department of the Navy Do Do Do Do Do Federal Aviation Agency - National Aeronautics and Space Administration. Albuquerque, N. Mex New York, N.Y San Francisco, Calif.... Washington, D.C Denver, Cob Washington, D.C Dayton, Ohio Fort Walton, Fla Washington, D.C Omaha, Nebr Washington, D.C huntsville, Ala White Sands, N. MeL Washington, D.C China Lake, Calif Dahlgren, Va Baltimore, Md Point Mugu, Calif. - - - Washington, D.C - - - - Atlantic City, N.J.. - -- Cleveland, Ohio 300 176 350 616 616 200 176 176 480 200 210 354 176 450 215 340 176 125 260 264 183 176 407 272 176 287 211 240 l~% 1 2 33~ 33/i 13~ 1 1 23% 13~ 13j 2 1 23-1 13~ 2 1 1 134 134 1 1 231 13/i 1 13% 131 131 $1, 799,000 644,000 2, 184,000 4,494,000 4,494,000 1,029,000 644,000 644,000 3,339,000 1,029,000 1,029,000 2, 184,000 644,000 2,954,000 1,029,000 2, 184,000 644,000 644,000 1,414,000 1,414,000 644,000 644,000 2,569,000 1,414,000 644,000 1,799,000 1,029,000 1,029,000 $994, 000 772,000 1,068,000 1,512,000 1,512,000 846,000 772,000 772,000 1,290,000 846,000 846,000 1,068,000 772,000 1,216,000 846,000 1,068,000 772,000 772,000 920,000 920,000 772,000 772,000 1,142,000 920,000 772,000 994,000 846,000 846,000 Do Do Do Do Do Do Do -Do Total Newport News, Va~ - Huntsvffle, Ala do Washington do do do Mountain View, CaliL 200 528 528 347 140 140 140 176 131 3 3 2 1 1 1 1 1,029,000 3,724,000 3, 724,000 2,184,000 644,000 644,000 644,000 644,000 846,000 1,364,000 1,364,000 1,068,000 772,000 772,000 772,000 772,000 . 57,449,000 34,378,000 `I'he foregoing tabulation shows that total estimated savings of $57,449,000 could be achieved over an initial 5-year period of use through purchasing rather than leasing these 36 systems. It shows also that estimated savings for each year of continued use past this period would be $34,378,000. (These annual savings represç~nt the amount of rental costs not incurred less maintenance costs.) Thus, if these systems were purchased, rather than rented, and used for 7 years the Government would ieahze savings of approximately $126 200 000 Another example of savings available through purchasing is offered by the IBM model 7080 system. The purchase of this model would produce savings of $333,009 when the system Is operated on a one-shift basis. Operation on a two-shift basis would produce savings of $1,397,000. On a three-shift basis, the savings would be $2,461,000. Continued use past the initial 5-year period PAGENO="0068" 64 AUTOMATIC DATA PROCESSING EQUIPMENT would produce additional annual savings of from $537,000 to $945,000 depending on `the extent of use of the equipment. According to the Bureau of the Budget inventory published In August 1962, there will be 16 IBM 7080 systems in use in the Government by June 30, 1963. One of these is to be purchased and 15 are to be leased. Based on the com- puted savings applicable to the representative IBM 7080 system, shown in Ex- hibit C, and on the planned monthly use as reported by the respective agencies to the Bureau of the Budget, estimated savings available through purchase, rather than lease, of the 15 IBM 7080 systems would be as shown in the follow- ing tabulation: Estimated savings available to the Government through purchasing 15 IBM 7080 systems scheduled to be leased by June 30, 1963 Agency Use per month Location Shift Hours equiv- alent Estimated savings over 5-year period available through purchase Estimated annual savings after Initial 5-year period Office of Secretary of Defense Dayton, Ohio 550 3 $2,461, 000 Do Battle Creek, Micli. - - 480 28% 2, 195000 Department of the Air Forc~ Dayton, Ohio 400 21% 1,663,000 Do Ogden, Utah 450 23/a 1,929,000 Do Oklahoma City, Okla 400 23~ 1,663,000 Do Harrisburg, Pa 400 234 1,663,000 Do Mobile, Ala 400 23~ 1,663,000 Do San Antonio, Tex 400 23~ 1,663,000 Do Memphis, Penn 400 21% 1,663,000 Department of the Army St. Louis, Mo 367 2 1,397,000 Department of the Navy Harrisburg, Pa 250 13/2 865,000 Do Washington, D.C 220 1~j 599,0"O Department of Health, Education, Baltimore, Md 442 23/2 1,929,000 and Welfare. Do Baltimore, Md 372 2 1,397,000 Veterans Administration Chicago, Ill 380 2~( 1,663,000 Total 24,413,000 .* ,__.,, ----- *.*_ .__,, .* -, $945, 000 894,000 792,000 843,000 792,000 792,000 792,000 792,000 792,000 741,000 839,000 588,000 843,000 741,000 792,000 11,778,000 ,_,_,,,,,___~. This tabulation shows that, through purchasing rather than leasing, estimated savings of $24,413,000 could be realized over an initial 5-year period of use and that there would be additional savings of $11,778,000 for each year of continued use past this period. If used for a total of 7 years, the purchase of the 15 sys- tems would produce estimated savings of $47,969,000. These projections of estimated savings applicable to the IBM 7090, 7094, and 7080 systems and similar projections applicable to 14 systems2 of the remaining 16 Involved in our study show that the possible total savings available over a 5-year period would approximate $148 million. These projections are sum- marized in exhibit A. For additional use after the initial 5-year period, there would be further savings at the rate of over $100 million a year. These significant possible savings apply to only 523 of the approximately 1,000 systems that will be leased throughout the Federal Government by June 30, 1963. The full potential of the possible savings that could be realized through a manage- ment system that would give full recognition to these possibilities is difficult to estimate. However, we believe that the Government could save hundreds of millions of dollars in the next several years as a result of proper consideration of the financial benefits of purchasing and appropriate action, including the estab- lishment of effective arrangements to promote the fullest, practicable utilization by all Federal agencies of data processing systems. NEED TO CONSIDER SEPARATELY EACH COMPONENT ron LEASE OR PURCHASE The detailed cost comparisons of the 18 systems set forth in exhibit C demon- strate that each component of a system should be considered separately for lease 2 Two of the systems (Burroughs B-5000 and Sperry Rnnd UNIVAC III) for which we made cost comparisons are new, and the Bureau of the Budget Inventory report showed none of these two systems scheduled to be under lease by ~Eune 30, 1963. PAGENO="0069" AUTOMATIC DATA PROCESSING EQUIPMENT 65 or purchase. These computations show that the cost advantage of purchasing some electromechanical components, such as printers, card readers, and card punches, is not as great as the cost advantage available through the purchase of electronic components. In some cases, it is clearly disadvantageous to pur- chase electromechanical components. This is due In part to pricing policies of equipment suppliers and to the greater need for maintenance on electromechanical components because of the inherent wearing characteristics of mechanical parts. These factors would have to be weighed heavily in considering the purchase of these components. It might well be that, for the small cost advantage avail- able, it would not be worth the risk of purchasing a component that may cause a serious maintenance problem or one that may have to be completely replaced because of constantly increasing maintenance requirements. Because of these factors, detailed computations such as those shown in exhibit C should be made in order to provide the financial information necessary for deciding which components should be purchased and which one should be leased. SAVINGS AVAILABLE THROUGH PULL USE OF GOvERNMENT-OWNED FACILITIES Our comparisons demonstrate two additional points that should be emphasized. First, the larger or more sophisticated a system, the greater the rate of pur- chase advantage. This point is illustrated in the following tabulation of selected IBM systems analyzed. The rate of purchase advantage may be expressed as the percentage the purchase advantage (savings) bears to the total cost of purchasing. IBM system Cost to purchase 1 One shift ~ Amount of Rate of purchase purchase advantage advantage Two shifts ~ Amount of Rate of purchase purchase advantage advantage Three shifts ~ Amount of Rate of purchase purchase advantage advantage 7090 7080 7070 1410 1401 2 1401 1401 4 $3. 632, 000 2,653,000 967,000 711,000 415, 000 411,000 188,000 $644, 000 333,000 70,000 67,000 27, 000 7.000 -11,000 Percent 18 13 7 9 7 2 -6 $2, 184,000 1,397,000 435, 000 323,000 158, 000 137,000 41,000 Percent 57 50 42 42 34 31 20 $3, 724,000 2,461,000 795,000 579,000 288,000 267,000 94,000 Percent 94 84 74 70 57 55 42 1 Includes maintenance for one shift only. 2 Card and staple system operated as off-line equipment to a larger system. Card and tape system. Card system. On a one-shift basis, the percentage of purchase advantage steadily increases with each more costly system-from minus 6 percent for the least costly sys- tem to 18 percent for the most costly. On a two-shift basis, these rates run from 20 to 57 percent, and for three shifts, they run from 42 to 94 percent. A second important point is that the more use made of equipment, the greater the rate of purchase advantage. This factor Is also illustrated by the fore- going tabulation which shows in each case that the rate of purchase advantage increases with greater use of the system. For example, the IBM 7090 system shows an increase in the rate from 18 percent for a one-shift operation to 57 percent for two shifts and 94 percent for three shifts. When considered together, these two points demonstrate that significant econ- omies are available through purchase and joint or multiple use of large data- processing facilities. The Bureau of the Budget's published inventory of auto- matic data-processing equipment shows that a number of electronic data-process- ing systems are scheduled for operation on a one or two-shift basis. For exam- ple, 22 of the 23 IBM 7070, 7072, and 7074 systems that will be leased by June 1963, are scheduled to be operated for less than two shifts. Twelve of these systems will be operated for one shift or less. The low utilization scheduled for these machines is a result of individual agency planning and, since the po- tential savings available from purchasing increases with additional use of the equipment, it seems evident that more effective procedures are needed to coordi- nate throughout the Government the use of large data-processing facilities. PAGENO="0070" 66 AUTOMATIC DATA PROCESSING EQUIPMENT This kind of management action should help to significantly reduce the Gov- ernment's overall data-processing costs. FAILURE To TAKE PROMPT ADVANTAGE OF REDUCED SALES PlaCEs During our study we noted a number of instances where savings could ap- parently have been realized if prompt action had been taken to purchase installed~ data-processing equipment at reduced sales prices offered by the manufacturers. In these instances, the possible savings are based on considering the action from the standpoint of advantage to the Government overall and not from the stand- point solely of the individual using agencies. IBM MODEL 704 SYSTEMS On September 19, 1960, the International Business Machines Corp., announced that it would sell certain components of IBM 704 systems at 30 percent of the original price. This significant reduction in purchase price was not accom- panied by a corresponding reduction in the rental charges for the particular com- ponents. According to the Bureau of the Budget inventory as of June, 30, 1960, the Government had on hand 30 IBM 704 systems of which 4 had been purchased and 26 were leased. Had prompt action been taken by using agencies to pur- chase such equipment, the possible savings to the Government would have been relatively significant. Following are some examples: Federal Aviation Agency The Federal Aviation Agency in December 1959, leased an IBM 704 system for use at Oklahoma City, Okia., for use in the control of aircraft in flight and in the flight inspection of ground navigational aids. Under the discounted pricing policy, componertjs of this system renting for $23,400 per month and originally priced at $1,116,800 became available for purchase for $335,000. The Agency decided not to buy this system, however. Had these components been purchased in December 1960, the Government would have saved $87,500 through June 1962, and would be adding to these savings at the rate of $21,800 for each month of use after that date. These esti- mates of savin&s take into consideration the cost of maintaining purchased equipment under a manufacturer's maintenance service contract. In this case, if the Federal Aviation Agency had purchased rather than con- tinued to lease the components subject to the discount prices, it would have saved $349,000 through June 1963, the anticipated replacement date. At that time, the Government would own the equipment and could relocate it in a less critical area in place of other leased equipment and this procedure would create additional monthly savings to the extent that the rental of the replaced equip- ment would exceed the cost of maintaining the Government-owned equipment. Atomic Energy Commis8ion The Atomic Energy Commission leased an IBM 704 system for use in research and development work at the Argonne National Laboratory In Argonne, Ill. The equipment was installed in November 1957, at a monthly rental of $47,340. If the sy~tem had been purchased originally rather thsa leased, it would have cost approximately $2 million. On March 1, 1961, 5 months after IBM offered to sell the system at the dis- counted purchase price, the Atomic Energy Commission purchased certain com- ponents of the system for $598,000 for which it had been paying monthly rentals of $41,290. Had this equipment been purchased in October 1960, when it was first offered for sale at the di~counted price, the Government would have saved over $200,000 (5 months' rental charges at $41,290 less estimated maintenance costs). In this case, the agency attributed the delay in purchasing to fund limitations but has stated that it will give special attention to future situations where delays may cause the incurrence of otherwi,se avoidable expenditures of Government funds.2 8 transaction is also described in our report to the Congress on "Review of Selected Automatic Data-Processing Activities Under Atomic Energy Commission Cost-Type Con- tracts With University of Chicago and Midwestern Universities Research Association" (B-146763, Feb. 7, 1963). - PAGENO="0071" AUTOMATIC DATA PROCESSING EQUIPMENT 67 IBM MODEL 650 SYSTEMS On May 12, 1961, the IBM Corp. established an accelerated discount purchase plan on components of IBM model 650 systems. At that time, 136 of these systems were in use throughout the Government, 5 of which had been purchased and 131 were leased. Under the accelerated discount purchase plan, components were di~counted 15 percent for each year used up to a maximum of 5 years or 75 percent. Consequently, components that had been. in use for 5 years could be purchased for as little as 25 percent of the original selling price. Examples of possible savings follow. Air Force Logistics Command At the time of the announced price change, the Air Force Logistics Command of the Department of the Air Force was leasing 36 IBM 650 systems. The rentals for these machines range from $4,200 to $23,000 per month. Purchase of some of this equipment under the accelerated discount plan could have resulted in significant savings. For example, eight of the nine components that made up three of this command's small-scale systems could have been purchased at approximately the cost of 1 year's rental; purchasing would have produced sav- ings of about $146,000 over the intended period of use. Air materiel area, Hill Air Force Base, Ogden, Utah.-A.t this location, two of the three components of a small-scale 650 system originally priced at $167,540 could have been purchased under the accelerated discount plan In July 1961 for 31 percent of the original price or $52,000. This amount was less than 1 year's rental for these components. If these components had been purchased at the time of the announcement and taking into account the cost of maintaining pur- chased equipment under a manufacturer's maintenance service contract, the Government could have realized savings through June 1962 of $600. Beginning in July 1962, recurring monthly savings of $4,300 would have accrued to the Gov- ernment. We have been advised that this system is to be replaced in April 1963; however, savings to the Government of $43,600 could have been realized up to that date had these two components been purchased under the accelerated discount purchase plan. In addition, this equipment would be Government owned at that point in time and would be available for transfer to another Government elec- tronic data processing facility for use in lieu of other identical equipment being rented. Air materiel area Oklahoma City OkIa -At this location all three components of the system could have been purchased under this plan in July 1961 for $68,000- less than 1 year's rental. This action would have produced savings of $1,500 through June 1962 plus recurring monthly savings beginning July 1962 of $5500 This system also is scheduled to be replaced in AprIl 1003 however the purchase of these components under the discount plan would have produced total savings to the Gbvernment of $56,500. 2709th Air Force Vehicle Group, Memphis, Tenn.-At this location, all three components of the system could have been purchased in July 1961 at 25 percent of the original price of $209,000, or $52,000. The purchase of this system would have produced savings of $2,100 through July 1962, and beginning in August 1962 recurring monthly savings of $4,000 would have accrued to the Government. The purchase of this system, scheduled to be replaced in June 1963, would have produced total savings of $46,100. At these three Air Force installations, for each month after the replacement dates that the eight components could be productively used, additional savings to the Government of at least $10,750 would be obtained. The Department of the Air Force has informed us of its awareness that "had the selected 650's in the Air Force Logistics Command been purchased at the time the discount was announced, a savings in equipment cost would have re- sulted." This agency also informed us that it was not notified by the manufac- turer of the price reduction for the IBM model 650. Post 0/71cc Department In the Post Office Department 13 small-scale IBM model 650 systems have been leased for use in a number of post office regional offices. These machines were installed over a period of 4 years beginning in September 1956. Under the accelerated discount plan, two of the three components of the system operated in the Richmond office, originally priced at $161 000 could have been purchased in July 1961 at 26 percent of the original price or $42,000. If these PAGENO="0072" 68 AUTOMATIC DATA PROCESSING EQUIPMENT two components had been purchased at that time, the Government would have realized savings of $500 through the end of August 1962. Then, beginning with September 1962 recurring savings of $3,000 would be realized for each month that the Post Office Department used the equipment productively, either at the original location or at other locations to replace the 650 type equipment being rented. At Minneapolis, all three components of a similar system, originally priced at $199,000, could have been purchased in July 1961 at 29 percent of the original price or $57,000. Had this system been purchased, the Government would have realized savings of $3,000 to October 1962 and in November 1962 would have started realizing recurring monthly savings of $3,700. Other model 650 components in use in the Post Office Department could also have been purchased at greatly reduced prices. The percentage of the original sales prices at which these components could have been purchased as of July 1, 1962, is shown below. [In percent] Location S IBM 650 components 650 655 533 Philadelphia 31 31 31 31 31 25 29 29 29 41 41 41 Cincinnati Atlanta Boston In November 1962, an IBM 1401 system *as installed in the Richmond office to replace the existing IBM 650 system. Current Post Office plans call for the replacement of the remaining 12 IBM 650 systems with 10 IBM 1401 systems. It is anticipated that this conversion will be completed prior to December 1963. As in the case of the IBM 704 systems, savings could have been realized had some components of the 650 equipment been purchased when the accelerated discount plan was announced. For example, if the two components at the Richmond office had been purchased at the discounted price in July 1961, savings of $15,500 would have been realized through January 31, 1963; addi- tional savings would be realized at the rate of $3,000 for each month that the components could be productively used at either Richmond or some other post office regional office. If the system at Minneapolis had been purchased in July 1961, savings of $14,100 would have been realized through January 1963. Also, additional savings would be realizable at the rate Řf $3,700 for each month past that date during which there was productive use of the system at either Minneapolis or some other post office regional office. Upon replacement, these five components would contribute further savings at the rate of $6,700 for each month that they could be used productively elsewhere in the Government in lieu of rented equipment. The Post Office Department has expressed disagreement with these observa- tions on the basis that funds were not available to it for purchasing such equipment at the time the reduced prices were announced and that by the time funding authority could have been obtained purchase action would have resulted in losses rather than savings. The Department's views are expressed primarily from the standpoint of its own m~tnagement problem. We recognize that the availability of funds is an important problem. However, our obesrvations concerning the acquisition of such equipment and the possible savings from such action are based on the advantage to the Government overall rather than the advantage to an indi- vidual agency. Possinr~c EFFECTS OF INCREASED GOVERNMENT PURCHASING The cost comparisons made in our study as to the relative financial advantage of purchasing or of leasing data processing equipment are based on the pricing terms of existing contracts between the Government and the manufacturers or on pricing information obtained directly from the manufacturers. PAGENO="0073" AUTOMATIC DATA PROCESSING EQUIPMENT 69 The possibility that prices would be increased if the Government purchased more equipment is a factor that cannot be fully evaluated at this time. We believe that there is some protection against increased purchase prices under the terms of the consent decree filed and entered in 1956 by the United States of America against the International Business Machines Corp. Paragraph (a) of section IV of this judgment, identified as civil action No. 72-344, states;: "(a) It is the purpose of this section IV of this final judgment to assure to users and prospective users of IBM tabulating and electronic data processing machines at any time being offered by IBM for lease and sale an opportunity to purchase and own such machines at prices and upon terms and conditions which shall not be substantially more advantageous to IBM than the lease charges, terms, and conditions for such machines." As IBM is the Government's largest supplier of EDP equipment, with 67 percent of the numerical volume, this provision should give some protection against unwarranted price increases. MAINTENANCE The purchase of equipment carries with it the responsibility for maintain- ing it In efficient working order. Maintenance service may either be provided by employees of the Government or be obtained by contract with manufacturers. For our cost comparisons, we used the quoted maintenance price terms of the manufacturers under their maintenance contracts. Throughout our study, we could find no indication that the quality of mainte- nance provided under the terms of manufacturers' maintenance service contracts was not as good as thot provided under lease agreements. As in the case of prices, the possibility that the quality of maintenance provided for purchased eqnipm~nt might suffer if the Government were to adopt a purchase policy cannot be fully evaluated at this time. Here again, however, we believe that the interests of the Government are reasonbly well protected by the terms of the above-mentioned final judgment. Section VI provides as follows: "IBM is hereby ordered and directed: "(a) to offer to render, without separate charge, to purchasers from it of tabulating or electronic data-processing machines the same type of services, other than maintenance and repair services, which it renders without separate charge to lessees of the same types of machines; "(b) to offer, commenoing 1 year after the entry of this final judgment and so long thereafter as IBM shall continue to render repair and maintenance serv- ice, to maintain and repair at reasonable and nondiscriminatory prices and terms IBM tabulating and electronic data-processing machines for the owners of such machines: Provided, That, if any such machine shall be altered, or connected by mechanical or electrical means to another machine, in such a manner as to render its maintenance and repair impractical for IBM personnel having had the standard training and instruction provided by IBM to such maintenance and repair personnel, then IBM shall not be required by this final judgment to render maintenance and repair service for such IBM machine; and (e) to offer to sell at reasonable and nondiscriminatory prices and terms to owners of IBM tabulating or electronic data-processing machines (whether or not the purchaser receives IBM repair and maintenance service) and to per- sons engaged in the business of maintaining and repairing such machines and during the period when IBM has such parts and subassemblies available for use in its leased machines, repair and replacement parts and subassemblies for any tabulating machines or electronic data-processing machines manufactured by IBM." It is of interest to note that, in addition to the maintenance services covered in paragraphs (b) and (c), the services, such as machine time to test programs, training, systems analysis, counseling, and software, which are extended with- out charge to lessees of equipment are guaranteed to purchasers of equipment under paragraph (a). CoNcLusIoNs On the basis of our study, we conclude that the Government can save very substantial amounts of money through more extensive purchasing of data- processing equipment We have also reached the following general conclusions 1. If possible and substantial savings are to be fully realized, management decisions as to whether data-processing equipment should be purchased or PAGENO="0074" 70 AUTOMATIC DATA PROCESSING EQUIPMENT leased should be made from the standpoint of advantage to the Government as a whole and not from the standpoint of the individual using agencies. 2. Because of the substantial savings that may be available, all decisions to acquire the use of data-processing equipment should be supported by specific computations showing the comparative costs of acquiring by lease and by purchase. 3. Where purchasing is financially advantageous, the realizable savings in- crease in proportion with the Increase In utilization of the machines. 4. The savings possible through purchasing are more pronounced for the larger and more complex machine systems. 5. WhIle significant savings may be realizable in many instances through purchasing rather than leasing,, for some types of electromechanical equipment, it Is more advantageous financially to lease rather than to purchase. NEED FOR MORE EFFECTIVE MANAGEMENT OF THE PROCUREMENT AND UTILIZATION OF DATA-PROCESSING EQUIPMENT IN THE FEDERAL GOVERNMENT In our report to the Congress on review of automatic data-processing develop- ments in the Federal Government (B-115369, Dec. 30, 1960), we stated that: "Generally, the practice of each Government agency is to procure equipment for its own needs (on either a purchase or a rental basis) and to trade in pur- chased equipment or exchange older rented equipment for newer models in ac- cordance with its own particular needs. Possible needs of other agencies for the traded-in or exchanged equipment are generally not considered. However, it is possible that such equipment can be used to serve the needs of other Gov- ernment agencies. "At least one major equipment supplier offers terms under which used equip- ment can be purchased at a reduced price depending on the period of time the equipment has been in use. However, we believe that a Government-wide ap- proach is needed to determine which machines should be purchased at the reduced prices and retained for Government use in lieu of new procurement. Likewise, before trading in purchased equipment which is no longer suitable for the original using organization, efforts should be made to determine the possibil- ity of transferring the purchased equipment to other Government organizations requiring such equipment in lieu of new procurement. "We believe that a mechanism should be established in the Government to provide the neéessary arrangements whereby the procurement and transfer of data-processing equipment between Government activities would be fully oc- ordinated so as to keep costs as low as possible consistent with obtaining needed processing facilities." We are aware of no significant progress toward an effective coordinating mechanism in the Federal Government for achieving the interrelated objectives cited. Our current study of the financial advantages of purchasing data-processing equipment over leasing it further emphasizes the great need in the Federal Government for a better coordinated and integrated management system for achieving the fullest degree of economy and efficiency in acquiring and utilizing this kind of equipment. Under the present system of decentralized management, each agency makes its own decision as to the method of acquiring this equipment. There is no effective coordinating machinery at work to give proper consideration to lease~. purchase decisions from the standpoint of advantage to the Govrenment as a whole. Unless adequate measures are taken to provide a stronger management system, millions of dollars of unnecessary expenditures will continue to be made. We are convinced that the establishment of a strong central management office in the executive branch of the Federal Government Is essential to bring about the kind of management improvement that is needed to minimize such wasteful * expenditures. RECOMMENDATION TO THE PRESIDENT OF THE UNITED STATES In view of the need for more effective and coordinated management of the procurement and utilization of data-processing equipment in the Federal Gov- ernment and the substantial financial savings that can be realized through improved managment of this function, we recommend that the President of the United States establish In his organization a central management office suitably PAGENO="0075" AUTOMATIC DATA PROCESSING EQUIPMENT 71 empowered with authority and responsibility to make decisions on the procure. ment and utilization of data-processing equipment with the objective of obtain- ing and utilizing all needed facilities at least cost to the Government. RECOMMENDATION TO HEADS OF USING DEPARTMENTS AND AGENCIES In view of the substantial savings that may be realized from more extensive purchasing, we recommend that the heads of all using departments and agencies, as an interim measure pending action on the above recommendation, arrange for a prompt and complete reappraisal of their current plans to lease data~process- Ing equipment and take such action as is possible to realize the financial sav- ings that may be available from purchasing such equipment and fully utilizing it. EXHIBIT A Estimated savings available to the Government through purchasing 523 of the 1,006 electronic computer systems scheduled to be leased as of June 30, 1963 Manufacturer System identiftca- tion Number of systems Estimated savings available through purchase over 5-year period Estimated annual say- ings after initIal 5-year period International Business Machines Corp.l Philco Corp International Business Machines Corp Control Data Corp Minneapolis-Honeywell Regulator Co International Business Machines Corp.2 The National Cash Register Co International Business Machines Corp Univac, Division of Sperry Rand Corp.3 Minneapolis-Honeywell Regulator Co International Business Machines Corp.4 Control Data Corp.2 Radio Corp. of America Do Total 7090 36 2000 6 7080 15 1604 7 800 8 7070 23 315 2 1410 27 SS-90 16 400 3 1401 310 160-A 16 501 27 301 27 6 523 $57, 449,000 13,706,000 24,413,000 8, 956,000 3, 700,000 4, 148,000 76,000 5, 713,000 1,902,000 217,000 24, 693,000 474,000 1, 666,000 654,000 147, 767,000 $34, 378,000 6,821,000 11, 778,000 3, 825,000 3, 194,000 4, 787,000 300,000 4,500,000 1,987,000 322,000 26, 965,000 431,000 4,648,000 1,344,000 105, 280, OCO 1 Includes IBM 7090 and 7094 systems. 2 Includes IBM 7070, 7072, and 7074 systems. 3 Includes Univac SS-80 and SS-90 systems. 4 Because there is no available analysis of the many types of IBM 1401 systems included in the inventory of automatic data processing (ADP) equipment in the Federal Government published by the Bureau of the Budget, August 1962, we have projected savings for all 310 systems based on the medium-sized card and tape system for which computations were made in our study. 1 Includes Control Data Corp. 160 and 160-A systems. 6 These projections are based on the number of systems that will he leased on June 30, 1963, as shown by the l3iireau of the Budget inventory report. The same report shows no plans for leasing the Burroughs B-5000 and the Sperry-Rand Univac III, and therefore no projections for these systems are made above. PAGENO="0076" ExHIBIT B Manufacturer System identifi- cation 1 shift or 176 hours per month' 2 shifts or 352 hours per month 1 3 shifts or 528 hours per month 1 I Cost to lease 2 Cost to purchase3 Savings or loss (-) on purchase basis Cost to lease 2 Cost to urbas' Savings or loss (-) on purchase basis Cost to lease 2 Cost to purchase 3 International Business Machines Corp Phulco Corp International Business Machines Corp Control Data Corp Minneapolis-Honeywell Regulator Co Burroughs Corp Univac Division of Sperry Rand Corp International Business Machines Corp The National Cash Register Co International Business Machines Corp Univac Division of Sperry Rand Corp Minneapolis-Honeywell Regulator Co International Business Machines Corp.4 Do.' Do.' Control Data Corp Radio Corp. of America Do 7090 2000 7080 1604 800 5000 Univac III 7070 315 1410 Univac 55-90.... - 400 1401 1401 1401 160-A 501 301 $4, 276,000 4, 218,000 2,986, 000 2,748,000 1,942,000 1, 527,000 1,218,000 1,037,000 886,000 778,000 674,000 603,000 442,000 418, 000 177,000 157, 000 $3, 632,000 4,361, 000 2, 653,000 1,825,000 1,830,000 1,212,000 1,233,000 967, 000 S48, 000 711,000 695,000 580, 000 41&, 000 411, 000 188,000 133,000 $644, 000 -143,000 333,000 923,000 112,000 315,000 -15,000 70,000 38,000 67,000 -21,000 23,000 27,000 7,000 -11,000 24,000 $5, 986,000 5,905,000 4, 180,000 3,848,000 2,715,000 2, 139,000 1,706,000 1,452,000 1,019,000 1,089,000 945,000 844,000 619,000 586, 000 248,000 220,000 $3, 802,000 4,724,000 2, 783,000 2,018, 000 2,042,000 1,253,000 1,430,000 1,020,000 936,000 766,000 796,000 673,000 461, 000 449,000 207,000 145,000 $2,184, 000 1,181, 000 1,397,000 1,830,000 673,000 886,000 276,000 432,000 83,000 323,000 149,000 171,000 158,000 137,000 41,000 75,000 $7, 696,000 7, 592,000 5,375,000 4,947,000 3,489,000 2,750,000 2,193,000 1,867,000 1, 196,000 1, 401,000 1,215,000 1,084,000 795,000 753,000 319,000 282,000 $3, 972,000 5,087,000 2,914, 000 2,210,000 2,256,000 1,294, 000 1, 627,000 1,072,000 1,053,000 822,000 880,000 766,000 507,000 486,000 225,000 155,000 $3, 724,000 2,505,000 2, 461,000 2, 737,030 1,233, 000 1, 456,000 566,000 795,000 143,000 579,000 335,000 318,000 288,000 267,000 94,000 127,000 1 200 hours per month 1 484 hours per month 1 612 hours per month 1,049,000 969,000 80,000 292,000 266,000 26,000 1,225,000 1,183,000 42,000 340,000 322,000 18,000 1,324,000 1,279,000 45,000 369,000 346,000 23,000 `Shift hours for 1, 2, and 3 shifts are based on multiples of the monthly 176-hour use 3 Calculations for 2 and 3 shift maintenance amounts are based on full shift charges for period designated in General Services Ad ninistration, Federal Supply Service, electronic manufacturers' maintenance service contracts. As a practical matter, most installa- data processing rental contracts with equipnent suppliers, except for the contract with tions would arrange for extra shift maintenance on an on-call basis which would be RCA which is based on I shift of 230 hours, and extended use for 5 days and 7 days con- somewhat lower than the amounts shown in this exhibit. The use of the full amount verted to 484 and 612 hours for 2 and 3 shifts, respectively, has the effect of slightly overstating the cost to purchase and tends to offset the con- 2 Calculations for 2 and 3 shift rental amounts are based on full use for 352 and 528 ditions noted in footnote 2. hours, respecti~ely, of all coviponents of each system. In actual practice, rental amounts 4 Card and tape system operated as off-line equipment to a larger system. for peripheral devices would be slightly lower than the amounts shown in this e~thibit 1 Card and tape system. because of contract provisions which allow averaging of use of multiple units of these 6 Card system. components for contract payment purposes. Use of the figures as shown has the effect of slightly overstating the cost to lease. Summary of comparison of lease and purchase costs of selected electronic data processing system.s over a 5-year period Savings or loss(-)on. ~ purchase ~ bas,s 0 PAGENO="0077" AUTOMATIC DATA PROCESSING EQUIPMENT 73 Co C~ C~ t~ C Co ~ Co ~ eq ~ 00 Co CoCo~Co~CoQo~ c-I CO ÷~ ~L ~ ~oo Co Co C Co C t- CO Co Co Co C~ Cod~ eqCo~00~2 ~ ~-~--~ eq Co Co Co Co CO Co Co t~- CI C- Co ~ C,: -I~ ~.E 010 c~)E ~2 CoCOt-~CICoCo CICOCoCoCOCo CI ~ ~00~ C ~ 0* CoCOCo ~IqICOCqCo~ q~ ~CI~00 I-. Co Co ~ Co C'- CoOl C- Co Co CO Co Co C- Co CO C ~ Co C- Co CO C'- Co CO Co CO Co Co C-. Co Co ~CoC Co ~ Co CoOl Co C-. Co CO CO C Co Co Co 0 0. 0) 0) CO 0 ~ Co Co 0) 0 Go 0) C- 0) 00000000CoI-00'--CoCoOlOlCICo u~ ~ ~0+1 Co~C*CoCoCoCo0*COCoCoCo ~ Co i ~~C~Ol0*COCo0*~Ol 0)0) 0 I E C I~ I 1 :~ I `Co ~k ~Ihd ~fl ~ ~hd ~fl ~ ~ ~ 10 0~30~10~G Co~o~ C) *~-~oo~ ~PO~O C~-~OQ~-C~ ~ E 0 Co Co Co Co Co CoOl Co Co Co Co CoOl Co Co Co Co Co Co CoOl Co Co Co Co Co CO Co PAGENO="0078" 74 AUTOMATIC DATA PROCESSING EQUIPMENT 0 0 0) ~ 0 0) 0 .0) r~i 00 to z .4 ~ - 0~ 00 0000 ~0 00 ~ 0000 ~ 00 ~0t,~00c'11~_ ~ 00 ~ CO ~ ~ CO CO Co ,~i ~ ~- ~ ~~~t_~00 ~ "~`t i~ ~ T il 0 ,-~ L I E 0 0 ~ H . 00N0CF-~0dt-00 ~ I- I- I-I-I- I- I- C- 1'- 0-0- H ~r 0-0- 1- ~. is `1 2~ ~ :~-o I ~ ~ uP ~ ~ ~ ~ ~ ~ ~ ~ 0) cO ~ ~ ~00~ P.~P~0E~Q h Co,-4004~~0 PAGENO="0079" AUTOMATIC DATA PROCESSING EQUIPMENT 75 0 c~ ~ `-4 00 ii~ i ~ i- ~ i ~0 - ~3~ńi i 00 0* 0*0* 00 CCC) 00 `000 000* iii ~ ~ i ~C~C0~ iii ~ i ii- ~ iii ~ i ~ i- iii ~ i ~ 1'- ~ ~jii ~ i ~ i_ ~ 0 I a PAGENO="0080" 76 AUTOMATIC DATA PROCESSING EQUIPMENT C) 0 0 C) C) Ow C)E~ C) C) C) C) C) C) C) 0 C) C) C) C) g~oo~ Co C) C) Co C) ~ cq c~ ~ I -iii-~:- ~ ~ i iii~ ~ ~-;~ ~ °E - ~ ~! ~ Oc~ C) ~ Co C) C) C) Co ~ Co ~ ~ Co Co Co `-~ C) C~ - Co ~ C) C) C) ~ C)~;3S~ ~ C) ~ Co Co Co C) ~ Co - Co C) C) ~ C~ ~ C) Co Co Co Co Co ~ C) Co C) C) C) ~4Co 0, Co Co C) C) L~- C) 0, Co C) C) o 0~ C) ~ C) Co C) C)C) C) ~4 Co C) C~ Co~Co C) C) C) ~j;;;~ C)~-O C)C)C)C)~ C) Co ~ C) ~Co Co C)Co C) Co C) ~ ~wS'~iC) C) CocX~Co~ C) CoCo Co~Co C) C) C)~Co C)C)~ICoC) ~ ~ ~.Co*0~ C) ~ ~ PAGENO="0081" AUTOMATIC DATA PROCESSING EQUIPMENT 77 C ~CJC~CJ I ! ~: i i iń~i ~ ~ i- ~ I ~ I ~ń~i ~ ~ I- ~ I ~ I §~~i ~ ~ ~ i~ ~: C~ ~ 00 00 Cq ~ c ~ooco~~ o6 ~oo~ ~ ~ ~o ~ ~ ~ I ~ I i~~I ~ ~ ~ i- ~ I ~ I ii~~ ~ ~ ii~~ ~ ~ `~ ,~ `0) 0) `c~:1*c~. ~00 ~ ~ `~ 0)o ~ *~*~;~ ~ ~ :~ ~k0) :~ ;~ ,~ `0)0) `c~ ~ -C~C'~0 ~ CC CC r~i z 0 0 0 iL~ ~ I ~ ~ ~ ~ ,~ ~ 1~1~ 0E-~00 0 0E~P~000 0E~~o C - - cq - - ~ - - - - 993'tO O-63-----6 PAGENO="0082" 78 AUTOMATIC DATA PROCESSING EQUIPMENT iA~~ ~ i~*~c1 ~h o~ i ~j H i C~C~C~ ~ - - - Co Co Cl) 0 0 0 Co Co Co I C~) Co Co Co I h ~ ~ ~! . ~ ~CQ~Co~ ~ ~u~ńii ~ 2:- M a ~ c~ `~ ,~ ~1 :: H : ~ a ~ , ~ &~ : ~:: ;~ ~ ~b - 2 :8~ ~ ,2 8~ ~ ~I~ULRi'~ ~ ~ o~o~oQ Q P.~OAiOO Q~1E~E~ - - N N OO~ ~ - - - - e~ ~ Co - - - - - - - - N N 00 `~ `51 `51 N PAGENO="0083" AUTOMATIC DATA PROCESSING EQUIPMENT 79 I !~ I ! ~I i ~ I ~ i i ~ 1~ ! i ! !~ i ~ ~ i ~ ~ z 0 PAGENO="0084" DATA PROCESSING EQUIPMENT ~4~'~oO ~ ~q~e~oo I Co `~ ~ - I I Co C~ - Co C~ Co ~ C0 ~! +) ~ ~E:~ ~ CC ~ ~ co~ oo - o ~ ~ Co 0- C~ Co ~ Co 00 Co - CO Co Co 00 ~ -~gfCO~C~ ~ 00 Co CO Co Co 00 ~ g g~COCOC-~ ~ 00 Co CO Co Co 00 ~Co ~2Co1~ ~ ~CO~C~ ~ 80 0) 0 0 0) 0) 0) 00 0.. ~d~oo 6II~r-~~c~ o6 0-- ~II0o ~CO~°0-- ~ CC 1100 C~ CC II ~0)CO~0-- CO - C0 Co~ ~4 CC .~ ~ ~ 0) ~ C~ h V ~2 ii ~ C'~ ~ ~CO~CO~C-~ ~ . ~ ~ § ~ ~ a E ~ * 0 ~ I ~ : ~ ~4 ~C ~C ~ : ~ ~ E~ , ~ &+C C ~ C ~ C ,~ ~ * 0) 0) ~ ~ 40 -~ 0) 0) 0)0)0) ~ 0) 0) 0)0)0) ~ Q~E~QQ~ o~oE~oo~ OEoEoE~OQ~ - ~ - CO - 0 0 I I I PAGENO="0085" AUTOMATIC DATA PROCESSING EQUIPMENT 81 i ~ I ~ I ~ i ~-r~ i ~ ii- ~ i g -~ ~ ~ I- ~ i ~ -~ ~ i- 1 ~ i ~ I- ~ i ~ I ! i ~ -~ ~ -~ ~t~-~_o~ j~ ~ i ~ ~ j~ ! cf;~ 0 0 I I 0 z :~ h ~ 000Q~0c3~c~ oooO~o~oc~ oooO~oc~oa~ QQO~OE-~E~ OOO~OE-~E~ QQ~~QE-~E~ - - - - - - - - ~ - - - - - - - - cc - - - - - - - - cc PAGENO="0086" 82 AUTOMATIC DATA PROCESSING EQUIPMENT Co ~ COC-C~o0 0 Co O~4Co C~ ~ - CC? CC - 0000 ,-4 Co Co ~ICOI CO C- ~-l -COO ~ C- 01 0 0. Co Co Co CC "4 CC OOCC1~l 00C-~ ~ 1000 CO - CC CC ~ Co CC C~ 0 00000 ~ CC Co ~ fl&~ C? cC I~ - ~4 ~-oco C- CC'-CCo "4 0.a Co ~ 5~55~005 00 "400005500 5 ~~i 0000 CO C4 Co CC C~ 01 COCOCo ~ ~Co,-iooCCco Co `C~ Co CO ~ 000400 ç~~CoCICo~Co 00 ~ i `-~~-~ I o-~.-~ ~ `~Co o-~o4 Oh ~- C) +0 0 0 00 CO 1000 CQ~C C? C) I - *~ ~ ~ p~ i~ ~ E~ i ~ ii- ~ ` ~fl ~ ,~4 i ~ I ~ .4-0 0) ~ ~5~5050 5 "4 00 CI 50 `-4 0000 C- 0-400 1 C- C C- C~ CO `C~ `C C ~ CC ! a ~ 0 0 ~ 0 0 ~ CO CO CO CO C4 ~ C- 4 4 ~ Co CO CO ~ CI CI C- , 0 I ~ CO CO CO CO ~ CI CI C- a ~ I C ~l C 4- II 0. H L~H ~ i,0C~ ~C0~ I 0. I,00~ I ~ ~0)Q'~ `~ ~ 1 :0)~~ `~ ~ I~ 0~ ~ 0) ~ ~ 0)' ~0~'C? Co 0) ~ ~ ~~0"4O0)O ~COO"4~COO ~COOhC~COO ~00~OO ~i~: &~ CC 0C,-io),.o,-~"4"4 0 CO 0 z CO PAGENO="0087" 83 4 0 I $ I z AUTOMATIC DATA ~ PROCESSING EQUIPMENT i ~ ~_~_g~t~ i- ~ I ~ ~ i- ~ I ~ ~ I- ~ I ~ I- ~ i- ! 1~ ~ cl~ ri~ z Co PAGENO="0088" 84 AUTOMATIC DATA PEOCESSING EQUIPMENT 000 C) t~. t~- II 00 C) ~ CC `-4 C) I )Ekc4~ ~) C) `-4 C) 0- 0-- c0~~ ~ ~-r `-40000-- t~ 0-- C) C) 0cC 0CC) 00 ~ ~~COc4~-4C~ i li;,~ ~_~-4r-4~ ii- ~ 0000CC Cl CC `-4)0 C) ~ 0) 0) 0) 00 0) 0) 0)0 0) 00 0) 0 00 -4000000 C) C) 04 C) C) 000-- ~~CC C) "4000-- 0000 CO C) C) CO C) C) ~ CC 140 cI cC 0~E~C) "4,4 ~4_ CI) CC z 0 S 1o~1 z 0 "4 ~0) 1! E~ ~u ~ ~C) ~ 00 ~`- C))0 000 00 ~ ~e ~ CC 00 ~ 1- ~400 C) ~ "4 C) 000-C) ~ C) ~ 4 `-4 I ~o~c6 C)~C~ Q~'~0C I i I- ~ `0 0 ~ cc * , ,,` C~,d~)d0l00C) ~ ) , ) , : 0)0)00CC) ~ ) , ~ CO'd~)0)000C) ~ ) ~ E~ ) ~ &~, . ~ ~, , , , , ~ ~ ~ ~ ~ E~ ``~~ E~ ~ ~ mi~i~ ~ 0E4&~0~ 0E~E~0~4 0E4E40~k -~ O400"4,-~-4 "4 , CO PAGENO="0089" AUTOMATIC DATA PROCESSING EQUIPMENT 85 0000I~00 *~ t1 lc~ 00~ ~ Icq t'- C~ C~ ~00 000000 ~`-~° ~ 00 C~ 00 00 ~ 00 ~ ~ 0000 - C~1 00 0)000000 ~ ~ ~Q000t~c0~o 000000000000 ~ 00 00~o~ 00 ~ ~ - ~ iii~~i~ ~ - ! 0)0)0000 0 00)00000) 00 ~ ~ 0)0000 0) ~ 000000 0 J0~: 00 00 00 000-00 0000 00 00000)00 0)00 ~ 0- 000000 00) CO ~ ~ t- 000000 00 0000 ~ ~0--4~t~000- CO 000o0)oooo ~ - Piiiijjj~jj ~ 00 CO z 0 0 CO ~) $00 1)0 0) 0) 0~ ~ ~ ~ o~ ~ cC C)~O000000 0)~c0O00O 0~ 0~E00~ Q~~Eo00~ -- 0 I ~ ~ 0~ u~ 00~E~ 00~EC 00~E. C-0-OCCO `~~-0--~O C~0CO - CO PAGENO="0090" AUTOMATIC DATA PROCESSING EQUIPMENT 86 t~ 0~C0Co Co O~ ~ 0 CO i~ Q~ ~4 ~Ii~ ~ ~ co~~~o6~ g~ ii~~ ~ ~ !~i~ CO~OO~Oi ~ c~c~CO0i ~ ~0 0000 Co Co C) :~ ~ ~ ~ C~ h ~ ~ H~ ~ - iia~ ~ C~C0~'4 ~ ~ § ~ L~ ~` ~ C) - i! :: - ~ I : Co Cd 0 ~ ` I ~d c~ - ~ a 1 I I ~ I ~J~h !~j~p ~ t~h~ QQI~E~ OC)~E~ C)QP~E~P~ c~ - - - - ~I ,~4 - - - - ~ - - - - - ~ - PAGENO="0091" IBM 1401 CAR]) SYSTEM $28,022 ~ -3,868 ~ 24,153 (J) 76,442 ~-4 -1,694 74,748 126,424 tO 479 126,904 1 shIft ~ 2 shifts_. 3 ~ 1 1 1 1 1 1 1 1 1 Central processor 1401 Card read/punch 1402 Printer 1403 Total $90, 900 33,000 46,500 170,400 127,260 46,200 65,100 $3, 753 $94, 653 $91,100 1,362 34,362 30,000 1,920 48,420 34,000 7,035 177,435 155,100 $8, 598 2,831 3,208 14,638 8,598 2,831 3,208 $3, 183 3,090 11,724 17,997 $127 118 472 718 $103, 008 36,039 49,405 188,453 -$8, 355 -1,677 -985 -11,017 Central processor Card read/pupch Printer Total Central processor Card read/punch Printer~. Total 1401 1402 1403 1401 1402 1403 5,254 1,907 2,688 132,514 48,107 67,788 91,100 30,000 34,000 6,366 6,180 23,448 254 236 944 106,318 39,248 61,601 238,560 9,850 248,410 155,100 14,638 35,994 1,436 207,168 163,620 59,400 83,700 6,750 2,452 3,456 170,376 61,852 87,156 91,100 30,000 34,000 8,598 2,831 3,208 9,549 9,270 35,172 382 355 1,416 109,629 42,450 73,797 306,720 12,664 319,384 155,100 14,638 53,991 2,154. 225,883 CDC 160A PAPER TAPE SYSTEM 1 shift 2 shifts~ 3 shifts..~. 1 1 1 1 1 1 Central processor 160-A Input-output typewriter.__.. 161 Total Central processor 160-A Input-output typewriter..~ 161 Total $135,000 15,720 $5, 574 649 $140,574 16,369 $90,000 10,500 $8,494 990 $13, 500 8,400 $557 346 $112, 551 20,237 150,720 6,223 156,943 ~- 100,500 9,485 21,900 904 ~- 132,789 189,000 22,008 7,804 908 196,804 22,916 90,000 10,500 8,494 990 21,000 12,600 867 520 120,361 24,611 211,008 8,712 219,720 100,500 9,485 33,600 1,387 144,972 Central processor Input-output typewriter Total 160-A 161 243,000 28,296 10,033 1,168 253,033 29,464 90,000 10,500 8,494 990 27,000 16,800 1,114 693 126,609 28,984 271,296 11,202 282,498 100,500 9,485 43,800 1,808 155,593 26,195 8,859 )`~`~ 6,186 41,241 60,746 ~- 19,396 ~ 13,358 C) 93,501 N0TE.-Amounts may not add In dollar columns because of omission of cents. PAGENO="0092" 88 AUTOMATIC DATA PROCESSING EQUIPMENT c~ ~` Co Co ~ CO c~ c~ e~ a' t~ - I I Co C- Co C~1'-~Co ~ Co C- ~ Co C~ ~ Co Co ~- - I D~ ~ ~ Co_ o~ +~o ~ o~ 00 ~` 0 Co ~co~-~ C- C-I-- ,.~ g~ ~ Co ~ -~ a' - ~ ~ -i-;,YC) ~ o li;'8 ~0C~ Co c~ ,-~ 0 ~ Co 0 `-`0 2~i~FCo~ a' Co C~ 0 ~4 0 ~ ~ a' ~ 00000 00000 Co CoO COO 0 0 Co CII Co 05555 SCo0Co0 CII - CII 0 0 0 Co Co Co Co Co ~ Co CQ Co I *~ ~ ~ ~ I~ E-' - - ~- ~ `-` li2 a' Co C- Co Co Co Co C- - -~ ~4 Co S CII 0 C- Co Co ~2 ~ a-i ~ Ł~) ~ 00000 ~ ~ 0 0 000 5555? 0 0000 Š 0 5 8 ~ 0 ~ ~ ~ ~ i, 0 ~ ` ~ ~ CIIC1~ ~ H ,,,, :`:: CIIC? H' ~ ` ~ : , ,:~ ~ ~ ~H-~ ~ 2 "~`~ ~ 2 ~ `~ 2 ~ ~` ~ ~ ~ OCoEE4~1 OCoE'E~ - - Š - ~ ~ - - - 0 0 z 1! ~Co- 1~;1 PAGENO="0093" AUTOMATIC DATA PROCESSING EQUIPMENT ~ `~J~ ~ -~- II ~ ~ I ~ `14T ~ T 89 i ~ i ~ o~g~C~ i- ~ ~ii ,4~ ~ ~~iI ~ - CO - ~ ~2 i~ ~ - CO - C) - C) ~~iIi CO - 00 C) C) CO C) 00 00 0 ~ C) ~ C)~00~ ~ 40) C) CO 00 C) C) 00 CD C) C) - * C) S~S~S~ C) C) CO 00 C) C) 00 CD 000) ~ -0 C) ~ C) ~~C)C)~cO ~ ~~uIi ~ ~ ~ C'~ `. 8000) ŠC)ŠCCDC) ~ ~C)C)o-t-~ ;~i 00 00 r~1 z C) C) CO C) I, ~0 `: *) CC :~ ~ :~ u~ ~ :~ :~ ~ :~ ~ :~ ~ ~ :~ ~ :bD- Co ~ CC~ :C~ ~ ~ o 0Q'~ :C~-0)~ ~ 00)00 ~ ~ 2o~o~ ~ `~ C)~Q~ ~ ~ ~ ~0)~0) ~ ~ ~ Eo ~ 0) 0) 0) ~ 0) ~O 0) 0) ~ cC ~ 0)~ ~)0) ~ O~~EoOC) C) ~EoOC) Q~~o~oEoQO ~ `C `C 4) C~) 0 0 C 8 CO `S .E `C S CO 0 PAGENO="0094" Comparison of lease and purchase costs over a 5-year period-Continued RCA 501 TAPE SYSTEM Extent of use Components Quan- Type Model tity Lease alternative -- Interest Cost to on cost Total cost lease to lease to lease Purchase -- Interest Interest Total cost Cost to on cost Cost to on cost to pur- purchase to pur- maintain to main- chase chase tam $714 $257, 836 Savings or loss (-) on purchase basis $89, 662 Base rental. Extended use, 5 days. Extended use, 7 days. 1 1 10 1 1 1 1 10 1 1 1 1 10 1 1 Ceirtral processor Storage Tape units Tape switching unit EM printer Total Central processor Storage Tape units Tape switching unit EM printer Total Central processor Storage Tape units Tape switching unit EM printer Total 503 561-2 581 547-6 535 503 561-2 581 547-6 535 503 561-2 581 547-6 535 $333, 720 210,120 340,200 18,540 105,060 $13, 779 8,676 14,047 765 4,338 41,606 $347, 499 218,796 354,247 19,305 109,398 1,049,246 $218, 500 150,500 297,000 11,800 85,000 762,800 $20, 622 14,204 28,030 1,113 8,022 71,993 $18, 3,024 85,440 1,032 21,672 129,168 115 3,465 40 873 5,210 167,843 413,936 13,986 115, 567 969,171 50,952 -59, 6~9 5,318 -6,169 80,074 1,007,640 000 16103 406103 218500 20 622 30 745 1221 271089 135 013 246,000 396,000 21,600 122,400 10,157 16,351 891 5,054 256,157 412,351 22,491 127,454 150,500 297,000 11,800 85,000 762,800 14,204 28,030 1,113 8,022 - 71,993 5,171 236,755 1,781 60,114 334,568 36,490 198 9,601 70 2,422 13,513 1,450 170,073 571,387 14,765 155,558 1,182,874 277,063 86,084 -159,035 7,726 -28,104 41,683 160,279 1,176,000 48,558 17,342 10, 900 17,837 966 5, 475 52,522 1,224,558 437,342 218,500 20,622 420,000 264, 000 432, 000 23, 400 132, 600 000 274, 900 449,837 24, 366 138,075 1,324,522 150, 500 297, 000 11, 800 85, 000 762, 800 14, 204 28,030 1,113 8,022 71,993 6,138 304, 953 2,119 77, 440 427,142 235 12,365 83 3,120 17,255 171, 077 642,350 15,116 173,582 1,279, 191 103, 822 -192,512 9,249 -35,507 45,331 1,272, N0TE.-AmoUIIts may not add in dollar columns because of omission of cents. PAGENO="0095" AUTOMATIC DATA PROCESSING EQLJIPME~T 91 :~ I I a C~ ~4 C~ C~ -4 t'~ ~ -4 -4 4~_~c'~co__~ ~i~~ii ~oo~ ui~~ ~ I- ~ i ~ ~C~O ~~iIii_ ~ ~~jI I ~O c~ ,-4 i ~ eo ii~~ii~ in~~ii ~ Ti i~ L~ ~f ~u~I ~ ~ ,-~ i ~ i ~ ni p4 p4 I z 0 0 PAGENO="0096" 92 AUTOMATIC DATA PROCESSING EQUIPMENT APPENDIX I-A COMPTROLLER GENERAL OF THE UNITED STATES, Washington, August 26, 1960. Hon. JOHN LESINSKI, Chairman, subcommittee on Census anti Government ~8tatistics, Committee on Post Office a~iuf Civil $ervice, House of Representatives. DEAR Ma. CHAIRMAN: During the hearing held by your subcommittee on June 5, 1959, on the use of automatic data~processing equipment in. the Federal Govern-~ ment, representatives of the General Accounting Office and the Bureau of the Budget were requested to make a study of Federal agency policies with regard to lease versus purchase of automatic data-processing equipment. A considerable amount of work has been done by our agencies on this study, working with representatives of other Government agencies and ADP equipment suppliers in an effort to ascertain the basis for present agency practices in acquir- ing the use of this kind of equipment. Since a significant amount of detailed analysis work remains to be done, we are submitting this interim progress report at this time to advise you of the status of the study and to summarize some of the information obtained. INTERAGENCY ADP REPORT ON RENTAL VERSUS PURCHASE OF ADP EQUIPMENT In April 1958, a task force of the interagency ADP committee completed a re- port entitled "Rental Versus Purchase Criteria for APP and EAM Equipment." This report was widely circulated in the Federal Government and it has been ex- tensively used as a reference document in connection with individual agency studies of the lease versus purchase problem. BACKGROUND OF GOVERNMENT PRACTICE WITH REGARD TO LEASE VERSUS PURCHASE Over the years, it has been the practice of Federal agencies to lease rather than to purchase punched card and electronic data-processing machines. As .of the present time, most of the punched card and electronic equipment used in Govern- ment operations is on a lease basis. Numerous reasons have been advanced as justification for this practice. Chief among these reasons are the following: 1. Leased equipment can more easily be replaced by new, improved equipment, thereby encouraging the use of the most modern equipment, 2. Maintenance of the equipment is the supplier's responsibility, which carries with it the need for the suppliers' organization, rather than the Government, to retain a trained maintenance staff and to supply maintenance material and spare parts. 3. Modification and improvement of leased equipment can be more readily pro- vided by the trained maintenance staff of the equipment supplier. 4. Systems and procedures help is more readily available from the equipment supplier if the equipment `is being leased. 5. Leasing is a hedge against obsolescence. 6. Capital investment is not required. 7. The risk of major loss by fire or other disaster is avoided. 8. Leasing provides a hedge against failure of the system to operate as expected. 9. Leasing provides a hedge against changing missions and military or other requirements. On the other hand, agencies that have purchased equipment outright contend that overall costs to the Government are lower, particularly when the equipment is used on a multiple-shift basis. Among the principal arguments that have been advanced in favor of purchasing ADP equipment are the following: 1. Overall costs to the Government are lower over a long period of time. 2. Date-processing systems that were `installed 6 and 7 years ago are still in use and performing dependable service. 3. If the equipment ceases to be economically efficient for the original activity, the equipment might well be used in another Government activity. 4. If it is necessary to exchange equipment for any reason, the trade-in allow- ance can be applied to the purchase price of the new equipment. 5. Purchase prevents additional charges by the suppliers for multiple-shift usage. 6. There is no danger of being unable to renew a lease or having to pay a premium rental for renewal. PAGENO="0097" AUTOMATIC DATA PROCESSING EQUIPMENT 93 Out of the 540 computers installed in Government as of June 1960, only 85 have been purchased. The continuation of the trend toward leasing is evidenced by the fact that for the current fiscal year, only 4 machines are scheduled to be purchased out of the approximately 100 computers scheduled for installation. In our studies, we have found that in some instances agency regulations favor leasing as a matter of agency policy by considering leasing to be the normal practice and requiring specific cost study justifications for the purchase of equipment. Also, our reviews have disclosed that some agencies have recently concluded studies which support the contention that purchase of certain kinds `of equipment is less costly in the long run, particularly where extra shifts of usage of the equipment is involved. In view of the results of these agency studies, we plan to pursue our review along the lines of attempting to more specifically develop the criteria which should be considered in arriving at lease versus purchase decisions in the agen- cies. At the present time, since the preponderance of all Government EDP equipment Is leased it is apparent that under existing agency programs pres ent practices favor leasing rather than outright purchase of equipment. We feel, therefore, at this point in our studies, that agencies should give more favorable consideration to purchasing ADP equipment in those instances where savings can be demonstrated over a period of several years even though large capital out- lays would be involved initially. This requirement can be established through Bureau of the Budget regulation, or other executive branch action; and pro- vision could be made for a review of individual agency determinations during the regular budget review cycle, using criteria established by the Bureau of the Budget as an outgrowth of our present study. This status report has been reviewed with representatives of the Bureau of the Budget and the information discussed herein has their concurrence. We will continue to carry out our studies of this matter and we will keep you advised as further developments occur. Sincerely yours, JosEPH CAMPBELL. APPENDIX I-n COMPTROLLER GENERAL OF THE UNITED STATES, Washington, November 8, 1961. B-115386. Hon. JOHN LESIN5KI, Chairman, subcommittee on Census and Government ~tatisties, Committee on Post Office and Civil gervice, House of Representatives. DEAR Mn. CHAIRMAN: In an interim progress report to your committee on the subject of lease versus purchase of automatic data processing equipment In the Federal Government, dated August 26, 1960, we advised you of the status of the study of this matter which we were conducting jointly with the Bureau of the Budget at the request of your committee. We commented in the report that our studies to that point indicated that agencies should give more favorable considei ation to purchasing ADP equip- ment in instances where savings could be demonstrated over a period of several years even though large capital outlays would be involved initially. We further stated that this requirement could be established through Bureau of the Budget regulations or other executive branch action, and provision could be made for a review of individual agency determinations during the regular budget review cycle, using criteria established by the Bureau of the Budget as an outgrowth of the studies being conducted. On October 14, 1961, the Bureau of the Budget issued its circular No. A-54 to the heads of executive departments and establishments on policies on selection and acquisition of automatic data processing equipment. A copy of this circu- lar is enclosed for your information and use. This document establishes execu- tive branch policy with regard to not only the question of lease versus purchase of APP equipment, but also the matter of selection and acquisition of such equipment by the agencies. We believe that with the release of this circular the initial joint study with the Bureau of the Budget of this matter has been completed. However, our Ofilce plans to carry out additional reviews in individual agencies with respect to the 99370 O~63-7 PAGENO="0098" 94 AUTOMATIC DATA PROCESSING EQUIPMENT utilization of ADP equipment, including the lease versus purchase subject, and we will keep you informed on the results of this work. Sincerely yours, JOSEPH CAMPBELL. APPENDIX I-c EXECUTIVE OFFICE OF THE PRESIDENT, BUitEAU OF THE BUDGET, Washington, D.C., October 14, 1t961. Circular No. A-54. Subject: Policies on selection and acquisition of automatic data processing (APP) equipment. To the Heads of Eeecutive Departments and Establishments: 1. Purpose.-Piiis Circular prescribes policies on (a) making selections of equipment to be acquired for use in the automatic data processing (ADP) program of the executive branch, and (b) making determinations as to whether the ADP equipment to be acquired will be leased, purchased, or leased with an option to purchase. 2. ~cope.-The ADP equipment affected by the policies stated herein includes: (a) Electronic digital computers, irrespective of use, size, capacity, or price; (b) All peripheral or auxiliary equipment used in support of electronic computers, whether or not cable-connected and whether selected and ac- quired with the computer or separately; (c) Punched-card equipment, whether .used in conjunction with or in- dependent of an electronic computer; and (d) Data transmission or communications equipment that is selected and acquired solely or primarily for use with a configuration of ADP equip- ment which includes an electronic computer. Analog computers are covered only when computers of this type are being used as equipment peripheral to a digital computer. Items of APP equipment that are (a) physically incorporated in a weapon, or (b) manufactured for the Government under a developmental contract, are not affected by the policies stated herein. 3. Applicability.-Tbe policies herein apply to ADP equipment acquired by the Government and to that ADP equipment which is acquired and operated by Government contractors solely to process Government data at Government expense (e.g., `Government-owned, contractor-operated facilities). These policies do not apply to ADP equipment acquired by universities and similar institu- tions with financial assistance through grants-in-aid of Government funds. The policy provisions of this circular become applicable when a determina- tion has been made that the utilization of ADP equipment is essential. It is assumed that such determinations have been preceded by and are based upon the results of well-documented studies which provide an adequate factual basis for concluding (a) that the functions or processes for which the ADP equipment can be used are' essential to perform, and (b) that the systems, procedures, and methods to be employed in performing these functions or processes have been designed to achieve the highest practicable degree of effectiveness with optimum efficiency and operational economy. Guidelines for planning and conducting studies preceding a decision to utilize ADP equip- ment, for the development of system specifications, and for equipment evalua- tion anth selection are contained in Bureau of the `Budget Bulletin No. 60-6, "Automatic data processing (APP) program of the executive branch: Studies preceding the acquisition of ADP equipment," dated March 18, 1960. 4. Policies on equipment selection.-The selection of ADP equipment includes the initial selection of APP equipment, the selection of ADP equipment ad- ditional to that on hand, the selection of APP equipment to replace ADP equipment on hand, the modification of equipment on hand, usually for the purpose of increasing memory capacity, computational capability, or speed of input or output, or combinations of the foregoing. In all these circumstances, the following policies apply: (a) The selection of APP equipment will not be made until system specifications are available to serve as a basis for selection. For purposes PAGENO="0099" AUTOMATIC DATA PBOCESSING EQUIPMENT 95 of this circular, the term "system specifications" means (1) the delineation of the objectives which the system is intended to accomplish; (2) the data processing requirements underlying that accomplishment i e a descrip tion of the data output and its intended uses, the data input, data files, volumes of data, processing frequencies and timing; and (3) such AD]? equipment capabilities as may need to be identified. System specifications will be designed to insure free competition among equipment manufacturers. (b) The officials responsible for making decisions on the selection of APP equipment will assure that the selection process accords equal op- portunity and appropriate consideration to all manufacturers who offer equipment capable of meeting the system specifications. In this connection, the selection process may :be facilitated by written invitations to manu- facturers to submit proposals as a means for obtaining information re- garding the capabilities of ADP equipment to meet the system speclficationa , (o) Two prime factors will be considered in the selection of equipment: (1) its capability to fulfill the system specifications, and (2) its overall costs, In terms of acquisition, preparation for use, and operation. The term "overall costs," as used in this paragraph, will be interpreted to include such cost elements as personnel, purchase price or rentals, maintenance of purchased equipment, site preparation and installation, programing and training. When APP equipment of two or more manufacturers meets the system specifications, the equipment which represents the least overall cost to the Government will be selected. Factors which do not relate directly or indirectly to the capability of APP equipment to meet system specifica- tions or overall costs normally will not be included in the considerations unless a conclusive judgment cannot be made on the basis of the two prime factors. 5. Policies on equipment acquisition.-Mo~~ commercially available APP equip- ment can be acquired by purchase or by lease, with or without an option to purchase. The General Services Administration has contracts with principal manufacturers, listed in Federal Supply Schedules (FSS), for the rental of ADP equipment. GSA currently is negotiating contracts for the purchase (in- cluding provisions for trade-in allowances) and maintenance of APP equipment. Until such time as these contracts appear on the Federal Supply Schedule, It will be necessary for departments and agencies to negotiate purchase and maintenance transactions. All ADP equipment acquisition transactions are subject to prevailing policies, laws, and regulations governing procurement by Federal Government agencies. In addition, except for equipment that can be acquired by the purchase method only, the following policies are applicable: (a) The method of acquiring ADP equipment will be determined after careful consideration of the relative merits of all methods available (I.e., purchase, lease, or lease with option to purchase). The method chosen will be that which offers the greatest advantage to the Government under the circumstances which pertain to each situation. In this connection, the fol- lowing general guidelines will be taken into account: (1) The purchase method is preferred when all of the following con- ditions exist: (I) The system study which preceded the selection of the equip- ment has established a reasonable expectancy that the APP equip- ment under consideration can be successfully and advantageously used. (ii) A comparative cost analysis of the alternative methods of acquisition, of the types illustrated by attachments A and B, indi- cates that a cost advantage can be obtained by the purchase method in 6 years or less after the date of delivery. This analysis usually will include the following cost elements under* each method: for the lease method-rental costs, including maintenance; for the pur- chase method-purchase costs, including purchase price, mainte~ nance, and other onetime costs applicable only to purchase; for the lease-with-option~topurchase method-rental costs, and pur- chase costs 1es~ credits applicable upon purchase. In addition to the cost elements described above, the residual value of equipment to the Federal Government will be considered as a factor in a com- parative cost analysis, Trade-in allowances quoted by manufac- turers may be used as a representation of the residual value. PAGENO="0100" 96 AUTOMATIC DATA PROCESSING EQUIPMENT (ill) The capabilities of the ADP equipment will continue to be needed and will be sufficient to satisfy the system requirements, current and projected, for a period beyond the point in time at which the purchase method begins to provide a cost advantage. The possibility that future technological advances will render the selected equipment comparatively obsolete before the cost advan- tage point is reached should not rule out purchase if the selected equipment is expected to be able to satisfy the system requirements. (2) The lease-with-option-to-purchase method is Indicated when It is necessary or advantageous to proceed with the acquisition of the equip- ment that meets system specifications, but it Is desirable to defer tem- porarily a decision on purchase because circumstances do not fully sat- isfy the conditions which would indicate purchase. This situation might * arise when it is determined that a short period of operational exp~eri- ence is desirable to prove the validity of a system design on which there is no previous experience, or where decisions which might substantially alter the system specifications are Imminent. (3) The lease method, without option to purchase, is indicated only when it is necessary or advantageous to proceed with the acquisition of equipment that meets system specifications and it has been estab- lished conclusively that any one of the conditions under which purchase Is indicated is not attainable. (b) Negotiations or renegotiations of equipment delivery dates will be conducted in a manner which insures that firm and final commitments by the Government to accept delivery of ADP equipment on a specific date will not be made until it has been determined through a readiness review that the using agency will be prepared to use the equipment productively as soon as it becomes operational. 6. Review of esrrent or pendiag lease transaetions.-(a) Lease or lease-with- purchase-option transactions in effect at the time this circular is Issued, and which are expected to remain in effect until fiscal year 1964, will be reviewed in the light of the provisions of paragraph 5. If it is found to be to the advan- tage of the Government to purchase leased ADP equipment in this category, steps will be taken to make such purchases during the earliest fiscal year in which funds for this purpose are available to the Agency. Reviews of current lease transactions should be undertaken as soon as practicable and completed by June 30, 1962. (b) The method of acquisition of APP equipment selected but not yet accepted for delivery at the time this circular is issued will be reviewed for adherence to the policies herein stated, and, when indicated, the basis of acquisition will be changed to conform if permitted by the terms of the contract or agreement. 7. Documentation.-System studies (sometimes referred to as applications studies, feasibility studies, and by other terms), system specifications, and readiness reviews will be fully documented. Decisions on the selection of ADP equipment, on the method of acquisition, and on the review of the current status of the method of acquisition also will be documented to reflect adequately the considerations taken into account and the basis for the decisions~ 8. Adm,inistration of policies.-The head of each executive department and establishment will establish the necessary framework of procedures,, including appropriate reviews and controls, that will assure compliance with the policies herein stated. By direction of the President: DAVID Fl. Bnu~, Director. Attachments. PAGENO="0101" AUTOMATIC DATA PI~OCESSING EQUIPMENT 97 [Attachment A] Lease versus purchase representative ADP computer system base~i on 2-shift use Item of cost Costs by fiscal year 1962 1 1963 1964 1965 1966 1967 1. Purchase basis: (a) Purchase costs (b) Maintenance, cumulative (c) Cumulative, ourchase basis - 2. Lease basis, cumulative (including maintenance) 3. Purchase basis exceeds lease basis 4. Lease basis exceeds purchase basis , $600, 000 45,000 645,000 200,000 445,000 0 $90,000 690,000 400,000 290,000 0 $135,000 735,000 600,000 135, 000 0 $190, 000 790,000 800,000 10,000 0 $245, 000 845,000 1,000,000 145,000 0 $300, 000 900,000 1,200,000 300,000 1 Year acquired, utilized full year. (Attacintient B] Lease versus lease-with-option-to-purchase representative ADP computer system basei on 1-shift use Item of cost Costs by fiscal year 19621 1963 1964 1965 1966 1967 1. Lease basis, with-option-to-purchase: (option exercised at end of 1st year). (a) Lease (5) Less, credit upon purchase (c) Purchase costs (d) Maintenance cumulative (e) Cumulative, iease/option basis.... 2. Lease basis, cumulative (including maintenance) 3. Lease/option exceeds lease basis 4. lease basis exceeds lease/option basis $150,000 -75,000 600,000 26,000 701,000 150,000 551,000 0 $52,000 727,000 300,000 427,000 0 $78, 000 753,000 450,000 303,000 0 $108,000 783,000 600,000 183,000 0 $138, 000 813,000 750,000 63,000 0 $168,000 843,000 900,000 57,000 1 Year acquired, utilized full year. PAGENO="0102" 98 AUTOMATIC DATA PROCESSiNG EQUIPMENT APPENDIX II INVENTORY OF AUTOMATIC DATA PROCESSING (ADP) EQUIPMENT IN THE FEDERAL GOVERNMENT INCLUDING COSTS, CATEGORIES OF USE, AND PERSONNEL UTILIZATION AUGUST 1962 Executive Office of the President Bureau of the Budget PAGENO="0103" AUTOMATIC DATA PROCESSING EQUIPMENT 99 CONPBNTS PEEF~ACE HIGHLIGHT CHAHTS TABLE 1. SUMMARY OF AD? INSTALlATIONS IN THE FEDERAL GOVERNMM~p TABLE 2. INVENTORY OF COMPUTERS BY DEPARTMENT TABLE 3. INVENToRY OF COMPUTERS BY LOCATION TABLE 4. INVENTORY C)? COMPUTERS BY MAKE AND MODEL APPENDIX A EXPLANATION OF TERMS APPENDIX B IDENTIFICATION OF DEPARTMENT CODES APPENDIX C IDENTIFICATION OF COMPUTER CODES PAGENO="0104" 100 AUTOMATIC DATA PROCESSING EQUIPMENT PHEFACE This document includes information on the utilization of all automatic data processing (ADP) equip- ment in the executive branch of the Federal Government, ~ for equipment which is used in miii- tary operational and certain classified activities within the Department of Defense The information is based on reports prepared by the Federal agencies in accordance with Bureau of the Budget Circular A-55, dated March ]A, 1962, subject: Annual reports on the utilization of automatic data processing equipment in the executive branch. Tables I through IV contain tabulations of the data reported by the agencies. Table I contains a e,mmary tabulation by agency. Tables II, III, and IV contain listings of computer installations; each of these tables contains the seine information, but is arranged in a different form; i.e., Table II lists the installations by agency, Table III lists them by geographic location, and Table IV lists them by make and model. Highlights of the information contained in these tables are presented in graphic form in Charts 1 through 9 which precede the tables. Each chart is accompanied by an explanatory text. Historical data obtained from previous years reports are included in some charts to portray trends. Data for fiscal year 1961 and prior years are on an actual basis; data for fiscal years 1962 and 1963 are estimates. Explanations of certain terms used throughout the document, and listings of codes by which the Federal departments and the computer makes and models may be fully identified are found in Appendixes A, B, and C, respeutively. Questions or comnents related to this document may be directed to the Management Improvement and Research Branch, Office of Management and Organization, Bureau of the Budget, Washington 25, D, C. (telephone: code 113, extension 2733). PAGENO="0105" PAGENO="0106" 102 AUTOMATIC DATA PROCESSING EQUIPMENT CHART NO. 2 NUMBER OF ADP OR NIZA~ICHAL UNXTB 1. An ADP organizational unit is an element of an organization which has custody of and operates equipment configurations consisting of (a) punched-card equipment only or (b) one or more electronic digital cctnputers together with the supporting peripheral and punched-card equipment. 2. The numbec of ART organizational units is increasing steadily. Note that this growth is accounted for by an increase in the number of cc.*nputer units, inasmuch as the number of units with punched-card equipment only has virtually stabilized over the years. Number of ADP Organizational Units 1% 8% 4% 0-CARD ENT ONLY PERCENT CHANGE OVER PRIOR YEAR NOT REPORTED 1959 1964 1985 PAGENO="0107" AUTOMATIC DATA PROCESSING EQUIPMENT CHAR? NO. 3 TOTAL COSTS - ALL AD? UNITS 1. In P7 1962, the costs for all AD? units totaled $597 million and for P7 1963 are estimated to be $688 million. These costs include the salaries of personnel, equipment rentals, supplies, equipment purchase and maintenance, and site prepa~ ration. They also include the cost of AD? services procured by organizations not having AD? units of their own, either fran Government or commercial sources. 2. The continuous imcreaee in total AD? costs is accounted for by a correspond- ing growth in the number of computer units and the procurement of AD? contractual services; the costs of punched-card units appear to have leveled off and are estimated to be lower in P7 1963. 103 $ Millions 1984 1965 Total Costs-AU ADP Units Excluding Military Operational md Classified Uses PERCENT CHANCE OVER PRIOR YEAR: +17% +10% +15% AUP CONTRACTUALLI ~ SERVICES 1961 1962 Est~mats - EMil OF FISCAL YEAR PAGENO="0108" 104 AUTOMATIC DATA PROCESSING EQUIPMENT CHART NO. ~ DISTHIBUTION OF TOTAL ALP COSTS BY AGENCY BY 1962 flOP costs for the Departnient of Defense in BY 1962 totaled $397 million almost twice the costs of all other Government agencies combined ($200 million5. Distribution of Total ADP Costs by Agency Fiscal Year 1962 $ Millions ~1 DEPARTMENT OF DEFENSE ~ 66% Total Costs $591 PAGENO="0109" 1. AUTOMATIC DATA PROCESSING EQUIPMENT 105 CNARP NO. 5 ~ 1Y.rILIz~ ]~ ADP 1964 PAGENO="0110" 106 AUTOMATIC DATA PROCESSING EQUIPMENT CHART NO. 6 GROWTH IN NUMBER OF COMPt?TEBS IN THE FEDERAL GOVERNHENT 1. The first corn utera installed in the ?ederlGovermnt--still ~or Scientific ~ Qees,~ ~ l91~9 at the Balljstjcs Research laboratories in Aberdeen, S~ry1snd, and the SEAC, built and Jp~stalled ~t the National Bureau of Standards in 195G._The first ~cornputer 1s~Is~Ia for administrative or business-type purposes was the UNIVAC I-- delIvered to the Bureau of the Census in mid-1950. 2. During the early 1950's, uses of computers were concentrated prinarily in the sciedtific area. Business-type uses came into prominence about 1956. 3. The projection of 1500 computers by F~ 1966 reflects a slight leveling off from the sharp upward trend experienced during F~ 1958 - 1962, but recognizes a sustained growth as units with punched-card ec~uipeent only convert to the use of electronic computers. Growth In Number ofComputers in the Federal Government 1500 KEY Bureau at the Budget Estimates ~ Agencies' Current Estimates ActUal 310 403~~ 3 5 7 10 90 ~ 50 p4 0 0 1950 1952 1954 1956 1958 1960 1962 1964 1966 END OF FISCAL YEAR PAGENO="0111" CHART NO. 7 NUMBER OF COMEVCERS BY CATEGORY OF USE FY1962 There are 1006 computers installed as of June 30, 1962. Of these, 786 are used for one category of work, broken down as follows: 271o for scientific work onlJ 265 for administrative work only (i.e., payroll, accounting, personnel, etc.) 22~ for program operations work only (i.e., major work programs of the agency such as Treasury's disbursing operations, Veterans Administration's benefit payments, military inventory control programs, etc.) 23 for classified and other uses. Two hundred twenty computers are used for two or more categories of work. Other Number of Computers by Category of Use Fiscal Year 1962 188 Computers (18%) used fur see category only 220 Computers (22%) used for two or more categorIes 1,888' AUTOMATIC DATA PROCESSING EQUIPMENT 107 B J Classified. ~13 9 Numb,rso, ohart elf ,ot addto this betel because of muiti'category use of 220 computes PAGENO="0112" 108 AUTOMATIC DATA PROCESSING EQUIPMENT CHANT NO. 8 COMPUTER UTILIZATION - HOURS PEN MONTH 1. Seven hundred fifty-one (75 percent) of the 1006 computers installed at the end of PT 1962 were reported operating at least 176 hours per month--which is the equivalent of a normal ~O-hour work week end is the number of hours for which a basic minimum monthly rental charge is made. Twc hundred fifty-five (25 percent) were reported operating less than 176 hours per month. 2. Two hundred fort~y_four(2l4 percent) were reported operating at least 352 hours per month (the equivalent of a 2-shift day); 59 (6 percent) were reported operat- ing at least 528 hours per month (3-shift day). 3. The average utilization for all ccmputers reported was 267 hours per month. Computer Per Month 9 811-103 Percent of 100sf 3% 22% Range of Hours I -j 91.-- Fiscal Year 1962 11% 18% 8% 5% 1% AVERAGE USE: 281 Hours Per Mouth ---I PAGENO="0113" CHART NO. 9 INJIVIBEE 0? COMPtJTHAS PUBCHJ~si~ 99370 0-63-8 PAGENO="0114" 110 AUTOMATIC DATA PROCESSING EQUIPMENT TABLE I SUMMARY OF ADP INSTALLATIONS IN ThE FEDERAL GOVERNMENT FISCAL YEARS 1961 -965 (EochldHs MiliI,~y Op,ooio~oI ~Nd Ckss)Iied UsGs A Ike DepadNeol NI Defeese) ASP UNITS WITH COMPUTERS ASP UNITS WITH PUHCHEDCAR8 EQUIPMENT ONLY UGIITRAU GRAND WOO ~ I(he 0) ___________ 42627 416873 1205 19548 11830W 34865 469981 1231 19196 117939 38556 567923 1210 17941 110~34W 20523 48389 43 236 2432 16064 49167 39 143 1436 10958 49721 33 128 1198 TOTAL 61 454 TOTAL 62 553 TOTAL 63 644 AEC 61 54 AEC 62 71 AEC 63 70 AGRI 61 8 AORT 62 10 AGO) 63 10 AID 61 1 AID 62 1 AID 63 1 808 61 BOW 62 808 03 COO 61 0 CAB 62 1 CAR 63 1 CIA 01 3 CIA 62 3 CIA 63 3 853 119161 874 118413 673 111021 92 2524 87 1523 93 1291 4243 914 1928 (1336 54q781 596828 6U8~350 51827 52118 52348 730 34481 374246 1006 38210 435116 1165 45107 529367 77 1517 27666 112 1U25 33103 119 2001 38763 8 858 7647 15 808 6945 21 976 8092 1 5 43 1 15 109 1 23 173 1 6 126 1 9 180 1 19 228 3 144 0947 4 140 1901 6 155 2162 23 831 7978 29 871 7624 36 1005 11476 1 12 124 2 56 525 1 64 529 1940 9587 466 7409 442 8494 14 57 109 173 126 12 192 228 10 1958 573 2074 21 2183 229 8207 1095 8719 4407 15883 124 12 337 529 29 315 2481 21 2502 385 12474 29 322 2497 21 2518 666 10593 27 338 2623 12 2635 765 11894 1 15 116 116 073 1 8 78 78 087 1 5 51 51 224 13 13 13 13 10 10 1 1 1 1 127 1 1 2 2 194 1 1 2 2 230 6 87 793 793 2751 A 98 877 877 2951 5 98 887 887 3070 24 187 0386 32 1418 52 9677 24 174 920 25 945 147 9811 22 177 833 11 844 (2:~3:) 16851 1 37 293 293 417 537 529 3 24 172 172 172 3 27 195 195 195 3 29 2)8 218 218 10 73 426 426 40 804 10 73 426 426 66 854 12 83 506 2 508 95 980 COMM 61 14 COMM 62 16 COMM 63 18 CSC 61 1 CSC 62 2 CIC 63 1 CZGOV 61 C2605 62 CZGOV 63 DC500 61 1 50 330 338 DC000 62 1 1 50 360 2 362 DCGOV 63 1 1 49 377 377 TOTAL, DEPORTMENT OF DEFENSE (050, AIR FORCE, ARMY, AND NAVY) 61 289 465 24263 252665 15652 268317 62 34A 626 26791 293389 12918 306307 63 425 750 31559 355622 34884 370506 OSD 61 12 21 1028 13493 1793 15288 030 62 13 27 1201 19044 1337 20381 015 63 19 45 1853 29970 2632 32602 OF 61 114 202 10503 114486 1907 116403 OF 62 135 263 11340 128711 3012 131723 AF 63 170 316 13643 152962 3120 050088 695 15338 717 15225 707 14327 11 70 13 86 21 108 306 6548 308 6223 297 5360 241 6038 254 6746 246 6710 137 2076 (42 2170 143 2149 85769 87132 82302 396 488 807 37624 37890 32309 39607 36929 36728 12142 12625 12458 ARMY 63 91 122 6044 60295 ARMY 62 100 158 6975 72160 ARMY 63 130 190 8872 91611 NAVY 61 72 120 6688 64391 NAVY 62 90 178 7017 73874 NAVY 03 98 199 7191 81079 801MW 62 601MB 63 6415 66710 5664 77024 7401 99012 5525 69916 3105 70579 1725 82804 520 86294 1762 550 87682 2735 433 82735 2569 9 405 131 10 498 301 45 852 230 100 37724 1166 63 37153 062.6 106 32415 364 30971 639 462 37391 ~29 247 36975 60,1 52 12194 26 15 12640 69 35 12493 45 21 30 356373 396724 456810 15824 21180 33684 153293 170682 190137 103120 115594 136647 82136 89268 95342 21 30 FAA 61 11 14 195 6334 11 6545 28 59 651 FAA 62 11 15 240 7292 79 7371 32 74 1158 FAA 63 10 18 289 8229 160 8389 30 127 1435 6 657 130 7332 22 1180 161 8712 30 1465 35 9889 PAGENO="0115" AUTOMATIC DATA PROCESSING EQUIPMENT 61 1~ 13 010 ~99o ~ 62 ~ 13 502 5009 P0 63 ii 13 503 5056 BBS 61 1 2 128 1143 RR$ 62 1 2 90 1057 888 63 1 2 84 1175 18 214 262 244 1 8 1 10 * 70 22 ~ 27 408 29 329 6 56 6 ~ 6 60 12 98 12 102 12 114 2 27 2 26 ~ 48 1 ~ 2 16 2 16 7 34 7 33 7 34 j~ 14 2 2 2 6 11 ~ 2 23 4990 6 308 2136 5099 6 304 2151 5056 6 292 2009 3 1146 3 15 149 1 1058 3 13 135 1175 13 133 111 ~II FCC 63 1 1 91 291 1020 1311 1 10 ~ 46 1432 FOIC 61 1 10 89 89 ~7 106 FDJC 62 1 11 103 103 3~ 137 FOIC 63 ~1 106 106 40 146 FHLBB 61 FHLBB 62 FHLBR 63 FPC 61 FPC 62 1 17 FPC 63 1 ~ 22 296 FR$ 61 1 1 ~ 214 FR$ 62 1 1 10 262 FR~ 63 1 1 10 244 FTC 61 FTC 62 FTC 63 GSA 61 6 6 188 2055 275 1330 GSA 62 10 10 331 344j 163 3694 GSA 63 10 10 ~ 4799 ~ 4858 ~EW 61 4 12 2133 18024 751 18775 ~ 62 9 28 2573 22548 121 22669 HEW 63 11 31 2764 24996 46 25042 HHFA 61 120 883 100 983 HHFA 62 1 2 127 1117 1117 HHFA 63 1 2 138 1276 1276 141 61 7 122 1380 ~5 1395 141 62 8 ~ 1570 536 2056 141 63 9 162 1756 29 1785 ICC 61 1 27 210 210 ICC 62 i 30 229 229 ICC 63 40 288 293 25211 61 2 ~ 740 2 742 2851 62 2 ~ 761 761 ~~51 63 2 ~ ~ 761 7~j LABOR 61 1 1 142 948 23 97j LABOR 62 1 2 173 1246 1246 LABOR 63 2 170 1376 25 1401 NASA 61 19 61 381 15120 2473 17593 NASA 62 24 83 506 2057o 1929 22508 NASA 63 25 90 685 28426 1502 29938 NLRB 61 NIBS 62 #198 63 NSF 61 ~ 62 NSF 63 ~ 61 1 1 76 1531 247 1778 OEP 62 1 1 83 1368 25 1393 ~ 63 100 1668 220 0888 PEACE 61 PEACE 62 PEACE 63 29 s ~ ~ 6 ~ 4 43 67 6 10 70 ~4 107 101 12 ~ 81 81 13 ~ ~ 146 314 214 262 244 70 70 76 88 88 109 109 109 649 653 2983 3604 4858 3038 3043 603 22421 2858 3 2861 1923 27453 2002 1 2003 1373 28418 379 1362 423 423 1540 465 465 0743 765 22 787 277 2459 994 14 998 ~ 3409 1021 1 1022 318 3225 153 153 364 048 148 2 20 408 295 299 1037 311 311 1072 324 324 1080 ~5 27 1033 96 2 98 61 1405 149 149 50 1600 217 51 268 5 17866 233 233 22756 ~332~3; ~s ~0 262 317 82 1860 90 0488 98 1 ~ 1987 12 103 112 2136 2131 2089 149 135 133 PAGENO="0116" 112 AUTOMATIC DATA PROCESSING EQUIPMENT. T~bI. 1 - C~o4~.d ADP UNITS WITH COMPUTERS ADP UNITS WITH PUNCHED CARD EQUIPMENT ONLY CO RAE- ~ OMPUTERSI YRAUI opRMArIs:Ic:prrAII~:~1 UNITS YEARS OPRR#21108CAPITAL TOTAL IRA 62 1 1 21 255 255 255 SOS 63 1 1 29 293 293 293 SEC 61 1 7 61 61 61 SEC 62 1 A 75 75 75 SEC 63 1 8 72 72 72 STAlE 61 3 55 458 27 485 485 STATE 62 5 41 41 3 61 528 15 543 584 STATE* 63 1 1 41 418 28 446 2 23 193 5 198 644 TRESS 61 9 17 2239 15644 310 15954 62 776 6676 1 6677 88 22709 TRESS 62 13 34 2389 18660 900 19560 62 736 6247 40 6287 98 25945 TRESS 63 16 36 3050 23321 2227 25548 61 576 5583 50 5633 89 31270 OVA 61 2 2 70 987 11 998 4 10 73 73 1071 OVA 62 2 2 79 1141 213 1354 4 7 55 55 1409 IVA 63 2 2 94 0266 138 1404 3 5 45 45 1449 USIA 61 1 10 94 21 105 29 144 USIA 62 1 12 125 15 140 66 206 USIA 63 1 15 149 4 113 72 225 VA 61 4 7 380 4921 26 4947 216 1095 8104 41 8145 13092 VA 62 5 9 338 4437 158 4595 215 1100 7839 69 7908 12503 VA 63 8 11 548 6050 2357 8407 213 1004 7131 20 71S2 15559 PAGENO="0117" ROY LG3O ROy LG3O PAGENO="0118" I. ~ ~ 1 C g~ c~ ~-4. z C r~r~ -~ o~~~oooommz~ ~ ~ r I PAGENO="0119" op oooooooooooo 0000000000000000000000000000000000000 ~ ~ > ~.- ~ 2 0 2 2 -(0000 222 222222 2~'22 2 22 2 22 2222222 12 1 12 ~22~111 1°111211 - 00000 0 - - ~ p ~ ~ ->00 () 2 - ~ ~Y2 0 0 0 0 0 00 0000 0 0000 0- 0 0' 0-0- 0 00 (/1 0 0 0 0 0 0(00 0 0 0 0 0 0 0 0 000 0 - 0-0' 0-0- - P `0- 0 -I ~-.__ JPO( >01~-. !! ~! ~!!~ ~ ! !! ~!! ~ 2 2 2 222 22 222 2 2 2222222 2 2 2 22 22 22222 $122 22 0 2 0 - 0o00 0' - - 0 -- 0000 00 0 - -- 0-- 0-0-0-0-0- - XZXZZ-".- 0-- -~p(pp~ z- - - 0 -~ i - >oo- 9 92 2999 9 9 9 22222 999 999 121 22999299!999~R9!~29 2~ 9 9 91 ~99999 9999 91J~9 99 2 2 22222 222 2; 2 ;~2;;2 2;; 2~;2 22 2 2 0000000 I :` PAGENO="0120" 1~ I. // PAGENO="0121" AUTOMATIC DATA P~ PAGENO="0122" I. ccccccccecc~cccccc ccccc~~'~ ~mmnizz~~. ~ accccczQm~z~ -- CCCCCZZXZZZZZZZZZZZZZZZZZZZ ~1~r.4DZZZ~D g ~ft u~c#~OOO >~ -CCCCCO -4ZX2 ~rG~~'-~ZZZ ~ oommn%o -.zoo b~ ~ r~oo o~ C U~O~ O'O~ ~ ~ O'O' U~C c I ~ s ~ - 0 0 0 0~'O0~'0 0~' 0 z ~ C C g ~ 0 0 ~ 00~0 00 PAGENO="0123" r~r~r~n ~ n r~r~ ~ ~rrrr r~r I C- PAGENO="0124" (~řU~cnř C~C~Cn 0! ~ o'oo~ rr~ 0 0 00>>> ; ZZI0~000OO - --- 0>0>>>>>>> >0>>>> >0 (a> 0 r >ar a a> Fomm-Oa.m o>m rC~0 000 0 C a C am ma >r-~aCw--~ a> (a 0 - [ C12 ~2 - 2 ~2 2 - 2 2 8 0 0 0 0 0 00(a~ 0 ~ao 00 -0 0fl C 0>0 ;;; -a;; ;;0020; -- 20 0)- ; -a; ~ 0)0) ; )0;CX;; ~ ;0)0)0)(00) ~ .a(fl- 0> - Z - < a-a> 211 222 212 xzo-aa.c2z 11 0)-a 2 02 1 22 2 0 2> 1-002> >2 022222 22 Xl I 22-0-0212 0 br-b a-a 2 ~2 ~ ~ ~G(0~ ~0 ~ a~a~ru((ac (a a100-1 0> - 0)0 ~(a (a(a0000002 228 8882228 ~0 og 8 02 28>00> 20 >g 00 0~ 2 2>> 00 ~> ;~!>O282;2 ro~a>o ;~;o~- ~ ~ ~J ~o~o ~ > z-a--zzmz- r:r:rr-rrrr :::::::r::2:::r-: r~r-:r : r:rrrr:rr rr-:2:~:2r,-o-r-r-2rr:r-r::rr:rr-,-rr:::r (a 2 2 2 (0 (0 (00 000 200 >0 (0 222 PAGENO="0125" 2-n 0~ 2 000 203 -30'0 000Ř0 00~-3O'O O0000-~Th4'3O0O00~O 00000000 -4 -Z 0r44~ 0022222265 002 0000212111 0000000000650 ZZ ZZ23Z33 0 00 ooo~~~ 0 0 0 - - .- 2-.-.~2--22 2- ---. - 6522 -.- -. 2222 65 0 0 Ł~ (~) 0 0 0 065 2~-J~36~5S5 0 C~9)5s 0~G5Q~- 0053 0 65 [ C1~ cr~ -- 053 50 6550 0 53 05300 0 0 06) 0 -- ----.o---.--- 02-532 ~ 2- --~ - o~ ooo - ~ -4 0o0 0 02 22osr o-0Cr---4co0o064-.as0m~ 0 ~ OOs-o--.--0--0- 0 84 484 00 0 0 00) Oo 00 ~- .--0 00 0 0 - 0 50 ~n ~ PAGENO="0126" d 0 C-) 0 C-) CI) CI) (I ::::<:~~~ ~ ~~22~222222~2222 ~; fl oomr~ ~ ! -~oo~oo> ~~__~t ::2~~~ z rmm !!!~ ~ ~! !!~ ~ o ° 2 2 ~ -. ç ~ ~m 00 0 0 I PAGENO="0127" zzzzzzzzz~zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz zzzzzz ZzzZzZzzZzzzzZzzZzzzzzzzzz~Zzzzzzzz ZZZZZZZZZZZZZZZZ ~ ~ ~ ~>>>~$u,u~,, o~ Ř~ZZZZ2ZZZZZZZZZ2ZZZZZZZZť=ZO 000 00 0000000000 00 000000000 0 22 00000000000 0000 w~w 0 oooooooo 000 00~~-~Oo OO00a~ 0WWWO000C~G~000 -I -~rrr-rr~~< ``~< R (4>>>> ~- >~~)~0>>0. ~ -ooo~r 00 0 ~ ~ ; ~;; ~ ;;;;;;;`~G~~ ;;; ~ ~ ;;;;;; ;; ~;; ;;!~- ox x~x x 0000000 ~>>>~0>D>~0D>> ~0U'0D0~00~0 0>0>>>>>> >00000000000Q(U((4 4(0~ (4 0000 0~D0W0 ~ ~0~D ~D 0 0 0~D0 PAGENO="0128" 3 ~ 3 ~ ~ 333 333 ~ ~ ~ ~ 00 00 00~~ ~ XXO 00~0O ~~~<<< 00 ~ om---~oo~w ommmm 0 C ci F ~I ~ I rj~ (C !!!!!!!r!ir! PAGENO="0129" -~ -~-- ---~ ~ ~ ~ ~ I ~ r 4. d C4.~CCC 4. C; ~zZC ~ 000 ~r~r~XCCCCCCCCCCCCCCCCCCCCCCC CC000 >4.4. II III II ~ X~ - o3 04.-CCO~4.C-C~-~ 04.4.XX-~-~C C04.0CC.-~ * -4 U ~ ~ ~ ç _~1~ ~ ~- C CCZ>4.> zZ~ C CCCI rCCCCG~4ZZ0Z I g ~ oo~ -~oooooooOoo~; - >;- > ~ -4 (4 CCC (4.~ 4 -4 (40 44 1 .4 0 -CC- CX - - - - CCCI ---~- -- - C) XCIX C XCIX CII I C I C>>> III III 1111 14. C C ~0(4G( C C C C L ri~ ~ 2222 ~ ~ 2 0 0 .C 0 C~ ~ ~ 0 2~ ~ ~ ( fl_ ~ 00 0~0 4. 004.04. 00 0. -~0 ONCO (40 CC~CCCCCC 2222200~*4 00 0 0 0 00 0(4 C 0! ~ !r ~ !~ ~ ~E i: ii 0 9 ~UU~ C PAGENO="0130" :~ `-3 ~ ~ ~ - z ~ ~ ~ ~ ~ ~O 9 ;; 9 ;~ ~ ! ; ;----;--.- ~ ;; ;;; 0 fl XX (~ X-< -3 X~-<-(-<-< XXXXXXXXXX XXXXXXXZX X X XX XXX XXX 3 0 ~~r-~-rrrr, ~ ~---~--~o' I ~ii 00 00 0 ~00000 ~-~-- 00 0 0 W -~ -0 ~ o~-_,;~; ;:~ ~ 02O_2~~02 OW000 0~P0 0000 ~ 0000000 000000 0 ~fl00~0 00~ ~ ! ! ~ rrrrv~r,~ PAGENO="0131" 00' 0'WW 00 222~~~ ~-- mmmmom mm mm mm,omm,mmo 4,004~ o (-4 0000' 0 0(0(0 (0O(0O(0(0~-(-(0' ~ 40 .~Z 44 ZZZZZZ44II 4444 Z~ZZZX~ ZZ~.-~-(X~Z 0 Z 4 - -- ~--~ - - ----------- -~-----.----.---- f ~ 4:0 4 - (0-( ~`0-4O'(-( (0 0 00W~-'o-4(0(0W -4 (0 --4 000(00000(0000' [ o - 0 ~`0 0 0 -0 4~~fl ~ ~ z 0- ---1 -40-40~40--40---40----40404040-40_-40~-~~ ~ :04:0 :0 244244 4 2424 :0:0:02:0:021 2 :02:02:0 -- -~ ~ ~ o~oo oo o° ~ °--aO 4000004 $40000440 0 (0 00004 ~Z ~ 40 -4- 40- ~ ~ ~ ~ PAGENO="0132" S I 000000 00000 000 0000 C ~ 2 2 -C 0 8 ~ C -4~ (I) rj~ c (12 -C ~ 1~ C 6 ~ 2 PAGENO="0133" 2~~22~ 22xE CC ~ ~ ~!! ~ ~F~F 3 gg~gg ~ S2~~ F 3~3C~ZZ CC UU~D~ ~D~Z3Z O~ >3 -/~D~>> 3Z~~-~-~ 333 >> 22 8 >> FF2222222222222 ~rrrr~r-~-,-r 0 F 0 0 F t~i [ ~J2 0 PAGENO="0134" o o 0000g oooooooo2~oooooo r~r PPPP2Pr-PP x2xt222 222 2222222222222222222222222222222222222 2 22 2 2 22g2~222~~ GSG H H "~ °°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°° °°° o p ,~>,o u~pu*i ~6~ooo ppp~ X<<<<>~Z ~PQnOZ(~O or~r~ nnrr~r~ C 0 0 w (~ ~ 0 ~ 2 H H ~2H 2 H 2H 2 2 0 ~ C ~ V~ ~ 00PO ~P a p~0 2~22~O ~ 2 ~ - - I I C) 0 C) C12 C12 PAGENO="0135" " LLL ==~~ ~ ~ ~~E; ~~::~: : : r~-~ ~ ~<< ~ ~-s-~c, - Z~'~~8 Z~Z1~i~ -. ~zr-~ ~ -. -s-s x~ r~ ~z 0 0 r:i~ L~i PAGENO="0136" z j x x ZZZ~3~ZZ 0 00000 0000000 o0o-~-~ - ~ L 0 C12 z 0 L~i PAGENO="0137" ----~~~ ~ g ~ 00 222222222 ZZZZZZZZZZZZZZZZZZZZZZ z2zzz2zzzzz2 0 0> 22 222>0>0>0 2>>> 222Z22202220222222 ~ ~ 2n~ ~~>>~202 2 -~ -0 2122>22>2>2> >222X10000000000000000 z> >-~>>c? c o-~-r~--~-~-r -~ 2 2>2>> 00200 02000 00 22 ~ >>~ ooc~oc 000~07ZZZZZ2ZZZ2ZZ~Z 22 2----.- >>>> 0 ~ Zz2Z2ZZ222222Z2Z o 2> -----0 1100 ZZZZ2ZZ ~-.-0 rn 2>>>> (0(0 >2 0> ~(2> r(r( 0>>>>>> 0000000~ -0 -0 -0 11>2>1>2 ZZZZZZ 2222 2222 2 ZZZZZZZZZZZZ (0 0 >222>>> 1 2>.---- --2------- (~ WI>>>>> -WI - I --- - g Q ~ 0 0 -J -.~-> a L CI) ~ g ~ CI) 0000000 0 ~J~J0OO0 00 0 0 0 0 0 0 >22ZZZZ~~;;;;;;;;;__ 0 0 0 WWI>1 -2 - .- I -0 -<-<<-<0>>>>>>> 12>2121212>2Z2221>>~rr 0 2222 011 121.0-00-0111> >3 1 2>11 2> 22222 2 2 I>>>>> >OooIO(00 2- 0o -> ao~.--~.-- 0 0 (0 00000 000000(0200020000 000(0*0 *0 000*0 000000000 (0 0(0 00 00 000> 00 02000 0 00 -0 - -0(~-00 - ~;;;;;;; ;;!~~; ;~ ; ;;~ ; ~ ~O~$ ~ 0 000000fl0m00m000201>00~000000~(00 -0000~> >000<00> 0 00 0 000 0 0 0000 (000000000 ~ :r :: r~rr~r~r: PAGENO="0138" I. 2 :;;~: <<<<< 00 ?~ 000000000 000000000 ~ 0 22 ~ >>>~ ~ 0 g ; ; ;~;; ; ~ ;; ;; ;; 0 C-) F 0 ~ (~:2 I ci) c/) z C-) PAGENO="0139" z~iu~z x ~ rr; r H H H ~ H ~WH ~ H H zz mm mm~mmm oocoomucoooooouo zr mm rrr <0< - >>0>Z>>>><>>>0>>>>>>>~>0>~>> ZZ>>>>>Z>>>0>0-o-.-, u nm <0 m-nm-n-nnnn Zr >>ZZZfl nmmmrnrnrnmrnrnrnrnrnn~n >o mmnn Zr Zr ~< -< -0 ~<-0-(-< -(-0 -0 ~-(-<~< > 0 88 22 2~ 22 Z 0(0 EZ ZZ>> 00' ZZ (0(00(0(0 -0-0-0 >00(00 20 Q>000GOO 0000Z Z~0(ZZZZ --. GOZ Zr 0(Z (00 22 22 -(-0-o <0' OU'Uo 0~0>zZm> ooooooooooooo Oz-0-0-(--(-0>> ZZ ZZ ZZZ -~ ~o-~ ~ ~ rng~ <~;~ggg~ ~ ~ rr on (00 -- -- << 0o<~<0<<<<~ ~ 88 <>88 >>~~8~>#~ 9.~ (0~o~(0(0 8 0>>>> ~ 0' Z 888888888888888 <<< `-1 0 ; ; ; g; ; ;;;;; ! ~; ; ; ; - ~ Zr r r r Zr r r Zr Z Zr Z 0 r ZZZZZZr Z Zr 2> r rzr r Zrrrr Z Zr Z r Z 0' (0 00 C 000' -<>-~00~0000 0' L ~ 00 00 00000000Zr 000 00(0<000000 O~88 <<<88 8°~8 8 ~ ~ - - - 0' 0 - --0 0 zO ~ :~ z ~ i 0 0 (0 0 0 2 2~2$8 00 (0 000 00000000 0 OZ00000 0 8 o 82o -Z-~. 0000 ~ I' C~n PAGENO="0140" I. --~-~ ~ ~ ---<~<-C-<-(<-(-<-(-<-C<<<-< C ~ 00000 ~ 0000 z~ ~ rt 22 ~f ~ ZZZZZ m-~ mm m ~m 0 >>>>>>>> ~00 ~ mZmZ~ ~ C~G~0zz p----- >zzr~ 000000000 >(#~U~U~> 2 ~ 2 ~88888ZZZZZZZZZ 2 0 2 000000000 22 - 00~0 I C C C) (C PAGENO="0141" C C C12 0 0 C > >> 00 >>>>>> ~ ~ ZZZZZZZZZZ ZZZZZZZZZ~~ ~ ,-00000000000000000 0~zzzzzzzz ~zoo000ooo0 cCcc 0~ -$000000>>o 2 I ~i g L zo PAGENO="0142" E ~ ~ :: ~ I" Z ZZ>ZZ>--->>>>> 0.> ZZZZ Z>n>>>>> <<<<<< -~-~-~o,,Z Z ZZZZZZZ ZZZZZZ ZZZZ>>>>0.>>>>> 0000000000 0>>>>ZZZZZ ZZZ~0~0 Z ~ ~fl>>>>>> > 0>0.0>0>>>>>>> rr 0 ~> 0-0 -<0-0- -<-<-<-0< -<-<-<-0-0-0 ~< ~<~< 0 -<-0 00 <<0'> ZO 0.0.0.0.0 000 0.~0.0.> 0. >VV -<-0 0 - 0.E0.0.0.ZZ Z~p(n0 00000000000000000000 00 <0000 >0Z 0000 -~ 222 0 0 0 0. 0000 ~Z~000000000000000~)000 0< ~> ~ 00<0 0000(00000022200>>> 000~ 0-o->-000000ZZ0>>>>>>>2.)U0> >>>>>>>>Z~0&o0. 000 00 -0-0 00> 00 2 0. 0. >0. r 00 000 ZZZ oz 000 -00-0 00 2 --4 0 ;; ; ; ; ~ ; ;; ;; ; ~; ~ ~ ;;;;;~ ;~;;~~ ~; ;; - ~< C~ ZZ ZZ ZZZ ZZ ZI XZ-Z ZZZ Z 0. Z -. ZZ Zzxzr0 ZZXZZZ-Z ZZ 0.40 40 0 0 00 0 0. >0 C0000. 0. > < 0 0 0 00 <0-0< ((400< 00<0 0 - (~ 0. >000 00000- <(0(0000<00.0 -O 0000000 0 -0 0 00 0<- 000 ~ ~ 0 ~ ~ 000< 0000 000< 0 0000 00 ((00 00 00 00 0000<0<00 00<00000000 0~0000r-. 000((002000<0 <-<<< 0-< 0 00< 00 -0<- z - -OZZ-Z- 002--w40--40000.0.00400000 -- 2 2-- Z> - 0.00 0. 0.0.00 0. 0.00 0. 0 0. 10. 0.00 0. 0.0.0. 0.000.0.00W<((00000.<-<0.0.00000.0.00W0.0.0. 0.00.0.0.0.0.00.0000(0000<00 0.000< (00 0 00.0. >0 ~ -000 <0 o< 0 0< <0< 00<0< <<<<0< <- -~o <->0<00C0~0~ 000-<000000r0.0.0.000 <<<-"0 40 0 0<<< (<(0 ~ ~ Z ~ ~ ~ g~ ~2222~ ~ 0 0 0< <0 00000<<<~<> zzz ZzzzzzZz~Z 0 ~>2ZC CCCCCCCCCCCCC~ --zZZ-~-~-~ CCC000 -4 ~ 0Z OOO~~'~00 CCCCCCCCCCCC O~4~O~O~ 03 0 ~ 3 ; ; ;;38;;; 3 ; ; 8 ;~.~;; ~ - ~ x> -< z>zz ~ -~ i ~x-~z~ ~ ~ zz~-~ -( z ~ z z z -< z>~r-z~ ~ xzz zz > 3 -c~~ -~o-s-o ~cc ~ [ ~ -~ )oooo oo~o 0 0 0 0 O?'0O~-0O0 0 00 0 0 0 0 1 - 0 0 - z0 ~ 0 0~ 03 ~000 0 0O-O~O 00-s 00000O~0 0 0~ ~00000 000 0000 00 ~00?~0 0~ 0 00 0 000 ~0 3 PAGENO="0147" E Z ~ ~ E ~ Z Z Z ZzZ ZzZzzzzZz Z ZZZZZZZZZZZZZZZZZZZZZ2ZZZZ Z ZZZ2ZZZZZZZZZZť=ZZZZZ Z ZZZZZZZZZZZ~Z2~ZZZZZZZZZZZZ Z ZZ2Z2ZZZZť=2~Z~Z ZZZZ2Z2ZZZZZZZr~~LLL'---XX~XXX ~ ~ 0 ozzc~'00 0000000000000!?000000 >>>>>>>>>~00~, o00000000000ooOOo 00-~Ccc O>OOOZZZZZZZ 0 0 0000 ~ 28~~>>~< ~ zz zz ~ G ;~ ~ ~ ;;;;; ;~ ;; ~ ~ ~; ; ;~ ~ e~ ~-< -( z~zz ~ z zoz ~>o-<~I~X ~ z-. ~ ~ z ~z-< ~; ~; (I ~ ~:!z ~ ~ L ~ 014 0 (1 00-400 00 00 0 0 ~I 0 ~0 0 0-14 oooooo o z ooo -~o o - - 0 - 0 0 0 Q ~ 0 (1 00040 00 0 00 (~Q 0000 Oo0~-0O00I-0 0000 000014 ~ 00 00 0-40 0 014~I0-I 0 o-.--.-.-rz -x ~- - z~o -zo -z-- zz 0-0-0--ox- - 00-- --2- ~ 2 140 14CC 0000(II4.-~-3 0o010140~ C >>~-4 0 14~ 0~-4 -00- 2 2~ -~ 2~ 2 ~22~ 2 2 ~ o:::r::~: I. PAGENO="0148" z m z -I 0 0 C) 0 *0 C r m z 0 0 0 fn r 8 ~ ~; g ~ o,)0m~--~-J-J-- z L PAGENO="0149" ~ooz~ ~ o~< oo~oom ~ ~ ~oo :~ ::~;;i~:i ~ ~1~I ~ :i:i :i:~ ~ :~:i:i:~:i :i ~ :i ~:i:~:i ~:~` ~: : :~ :~:i ~ ~ I I ~ ~ 2 ~ ~ c~ ~ 0 - >>)~flc~(~ >0 ~ ;ç~;;ç~o;!!~ ; ~ ~ r~r~rrt r~rrr~ 0 I. PAGENO="0150" 0 0 OOOOOOO~ 0 - jj~ O >oO~O~r~--~i X z-~>o~ ~ wz~Z ~~cnr >-,u~ r~r~ -. ~ ~--#-~z-~xx~ z --~ czc z-z ~ ~_~ro;c;~~ ~ ~roc~ o~o -z z-.zz (~2 xx ~vx mzoo~~o r~ oo-- ~~e~-s - - I- zxx: ~ ~ ~ ---- - --,~ ~ ~ PAGENO="0153" O'%ooo~o QOOOOOO~U'-O~$~OOOOOOOOOOOOOOOOOOO OO~*O ~OOOOOO O~O OO*~~Oo-~O I. PAGENO="0154" :~ :;~ ~ ~ ~ ~ ~ ~`J~ ~ ~ : ~ ~ ~ ~ ~ ~ ~ ~ PAGENO="0155" W _~u~o~o~a' ~ ~ zzzzzz ~; -zuzzzzz~-rzzzzz~?~zzz~ - zzzzz z 20 22 --- 9>> 9> 2O2~ZZZ2~ ńf~f~f~--2 -->~--->> I r ~ ~ 000 o~rxizoo oot,ooooo Ix 9 >9>> 0 000 PAGENO="0156" C;' 2222~2~22222~222~ 2 222 22 222222222222222222 22222222222292222222222222222222222222222 2222~ 222222222 a ;;;;-----;-;--;;;; -~;~--;~;;-;; ;;;;; ;;---------------;--;-;---__ ;;;;;-;-;;;;;;;;;~;;;;;;; PAGENO="0157" 2 222 222 2~2 2222 2222 ;;~;~;;;;;;;;;; ;;~;;;;;; I. PAGENO="0158" 0 0 -. ~ ~ ~ ;;; t~~; ;;;;;; ;;;;; ;;;;;;;;;; ;;;; ~g ~ >>o~ ~cccc xxxoccc Z~Zz --~z>; -~ ~-~> r-r-~ ~ I 2 PAGENO="0159" 0 0 *~ ~ io~ ~ ~ ; i~~ii~i ~i~i i~iiii~ ii ďäîî > 22~~ ~ ~ ~~Z2~r ~ PAGENO="0160" I' PAGENO="0161" AEC SAN FRAN 00 NAVY SHIps PAGENO="0162" I I ~ :~ I I ~: ~ ~ z z <-~-zzzz z c~ zzzor~ ~c- 00 z 00 C 0 ~ ~000>>~ F' ~ z 0 r,cCO zZz r O-~ I h~ 0000 ~rro ZZO MCnOO oz00r0r0~,zzm oomo~~oz~ 2~2Z 0 PAGENO="0163" 0 C12 (0 i ~I I ~ I 1~II PAGENO="0164" PAGENO="0165" ~z~;zz;zzz 0' U 2 p PAGENO="0166" 162 ATJTOMAPIC DATA PROCESSING EQUIPMENT APPEND]X A EXPLANATION OF TER~ Table I 1. ADP Unit with Computers: An ADP organizational unit using an equipeent configuration which includes one or more electronic digital computers. In these cases the peripheral equipment and supportLng punched-card equipeent are included in the unit. 2. ADP Unit with Puncbed..Card Equippent Only: An ADP organizational unit using an equi~ment con- figui~tion which does not include an electronic digital computer but consists of punched-card equip- ment only. 3. Number of Computers: The number of computers (central processors) installed at the end of the fiscal year. 4. Men-Years: Represents the full-tine equivalent of personnel who, as their principal occupation, are involved in the data processing function, such as the ADP unit supervisor, equipuent operators, system analysts, programmers, maintenance engineers, and clerks. Excluded are headquarters or staff ADP personnel who are not directly associated with a specific ADP unit. 5. ~rating Costs of an ADP Unit: Costs include salaries of civilian and military personnel identified in 4 above; equipnent rentals; ADP services acquired from other Government ADP units or commercial sources which supplement the work of the reporting ASP unit; and other related costs such as maintenance of owned equipnent and supplies. 6. ~p~a1 Costs of an ASP Unit: Costa include ASP equipeent that is purchased and site prepara- tion. 7. ASP Contractual Services Costs: The costs of ASP services (such as machine time, programming, and key-punching), which are acquired from governmental or commercial sources by organizational components that do not have ASP units, and which are therefore not included in the operating costs of an ASP unit. Tables II, III, and TV 1. Bureau, Office, or Ccamnand: The principal organizational component which has responsibility for the ASP unit in a department or agency. 2. Location: The Standard Metropolitan Statistical Area (as defined and published by the Bureau of the Sodget) in which the computer is located. If located outside such areas, the city and state are shown; locations outside of the United States are shown by country only. 3. Use Cod~: The principal area of computer application as identified by the following letters: A: administrative-service-type applications, such as peyroll and personnel accounting. P: program-type applications, such as military supply management, and social security claims administration. 5: scientific and engineering-type applications. C: classified applications. I: other applications. 4. Hours Used Per Month: O~erating time, including rerun and program testing time, but excluding scheduled or unscheduled maintenance time and idle time. NOTE: The information under the columns headed `Purchase or Lease,' "Uae Code," and "Hours Used Per Month" reflects the status as of June 30, 1962, ~ for those computers shown 25~ in the fiscal year 1961 or fiscal year 1963 columns in which case the information is as of the date of removal or June 30, 1963, respectively. PAGENO="0167" 163 COON ABC AGRI AID BOB CAB CIA COMM CsC CZGOV DCGOV DEF OSD AF ARNY NAVY EXIMB FAA FCC FDIC FHLBB FPC FRS AUTOMATIC DATA PROCESSING EQUIPMENT APPENDIX B IDENTIFICATION OF DEPARPMENT CODES CODE FTC GSA HEW HNFA INT ICC JUST LABOR NASA NLRB NSF OEP PEACE P0 EBB SBA SEC STATE TREAD TVA USIA VA IDENTIFICATIC! Federal Trade Commission General Services Administration Department of Health, Education, and Welfare Rousing and Borne Finance Agency Department of Interior Interstate Commerce Commission Department of Justice Department of labor National Aeronautics and Space Adsiinistration NationalIabor Relations Board National Science Foundation Office of Btnergency Planning Peace Corps Post Office Department Railroad Retirement Board Small Business Administration Securities and Exchange Commission Department of State Department of the Treasury Tennessee Valley Authority U. S. Information Agency Veterans Administration APPENDIX C IDENTIFICATION OF COMPUIER CODES MAKE AND MODEL ADVANCED SCIENTIFIC INSTRUMENTS 210 ASI21O BENDIX CORPORATION (BENDIX COMNY!ER DIVISION) 0-20 BEN 020 0-15 BEN 015 BURROUSNS CORPORATION 220 BOB 220 205 BOB 205 204 BUR2O4 E-101 BUN E1O1 E-102 BOB E1O2 CONTROL DATA CORPORATION 1604 CDC 1604 160-A CDC 160A 160 CDC16O DIGITAL EQUIPMENT CORPORATION PDP-l DEC PDP1 EL-TBONICS INCORPORATED (ALWAO COMPUTER DIVISION) ALWAC III.E ElF ALW3 ALW-2 ELF AIM2 GENERAL ELECTRIC CORPORATION 225 GEL 225 GENERAL MILLS AD/EON GEE NOB GENERAL PRECISION INCORPORATES (LIBRASCOPE DIVISION) LIBRATROL 500 LIE L500 LIBRASCOPE AIR TRAFFIC CONTROL LIE ATC MINNEAPOLLS-HONEYWELL REGULATOR COMPANY N-COO EON Coo N-too HON too 1000 NON 1000 IBM CORPORATION 7000 SERIES IBM 7--- 700 SERIES IBM 7-- 650 IBM 650 305 IBM 305 1620 IBM 1620 1401 IBM 1401 ].41O IBM 1410 MAKE AND MODEL. 22P! MONROE CALCULATING MACNINE COMPANY XI W)NXI NATIONAL CASH REGISTER COMPANY 304 NCR3O4 315 NCR 315 390 NCR39O 102 NCR1O2 NORTH AMERICAN AVIATION, INCORPORATEE) (AUTCAAETICS DIVISION) BECOME II NAA BEGS RECOMP III NSA REC3 PACKARD BELL TE250 . . - PAB25O ~PHILCO CORPORATION 2000 PHI 2000 RADIO CORPORATION OF AMERICA 501 RCA 501 301 RCA 301 BIEMP.C RCA BIZ SPERRY RAND CORPORATION (REMINGTON RAND DIVISION) 2450 REM LARC 1100 SERIES REM 110- UNIVACI BEMUI UNIVAC II REM 011 UNIVAC III REM 13111 S88o/9o REM8S-- FILE COMPUTER 0/1/2 REM USC- 490 REM49O ROYAL M3BEE CORPORATION RPC 4000 ROY 4OQQ ZCAP3O ROYIS3O SYLVANIA ELECTRIC PRODUCTS INCORPORATED 8.9400 5)1 9400 UNDERWOOD CORPORATION ELECOM 120 UN) 120 ELECOM 125 TiNt) 125 IDENTIFICATION Atomic Energy Commission Department of Agriculture Agency for International Development Bureau of the Budget Civil Aeronautics Board Central Intelligence Agency Department of Commerce Civil Service Commission Canal Zone Government District of Columbia Government Department of Defense Office of the Secretary of Defense Department of the Air Force Department of the An~r Department of the Navy Export-Import Bank of Washington Federal Aviation Agency Federal Communications Commission Federal Deposit Insurance Corporation Federal Home Loan Bank Board Federal Power Commission lederal Reserve System NOT DET PAGENO="0168" 164 AUTOMATIC DATA PROCESSING EQUIPMENT APPENDIN III AGENCY REPolrrs ON H.R. 5171 1. General Aceo'unting Office C0MPTR0u.im GENERAL OF THE UNITED STATES, Washington, D.C., May 15,1963. Hon. WILLIAM Ij. DAWSON, Chairman, Committee on Govermnent Operations, Honse of Representatives. DEAR Mn. CHAIRMAN: Reference is made to your letter of April 1, 1963, acknowledged April 2, and letter of May 3 from the chairman of your Govern- ment Activities Subcommittee, requesting our comments on 1I.R. 5171. The bill would amend title I of the Federal Property and Administrative Serv- ices Act of 1949, as amended, 5 U.S.C. 630-630g-1 (supp. IV), by adding a new section 111 which would grant authority to the Administrator of General Serv- ices to coordinate and control the purchase, lease, maintenance, and use of electronic data-processing equipment by Federal agencies, and to operate or provide for the operation of such equipment by delegation of authority or otherwise. In carrying out his responsibilities under this section, the Administrator is authorized to provide electronic data-processing equipment suitable for efficient and effective use by Federal agencies through purchase, lease, transfer of equip- ment from other Federal agencies or otherwise, and to provide for the mainte- nance and repair thereof by contract or otherwise. The Administrator is further authorized to transfer such equipment between Federal agencies, to require joint utilization thereof by two or more Federal agencies, and to establish equipment pools and data-processing centers for such joint use when necessary for its most efficient and effective utilization. The Administrator, in his discretion, may delegate authority to lease, purchase, maintain, or operate (1) general classes of equipment, (2) equipment of special design needed to fulfill some unique requirement or special purpose of a particular Federal agency, and (3) equip- ment necessary for national defense and security. The bill would establish an electronic data-processing fund, without fiscal year limitation, which would be used to finance the administrative expenses and costs incident to the procurement and utilization of electronic data-processing equip- ment. This revolving fund would be financed primarily from advances and reimbursements from available appropriations and funds of any agency (includ- ing the General Services Administration), organization, or persons utilizing such equipment and services rendered to them at rates determined by the Ad- ministrator to approximate the costs thereof. The capital of the fund would consist of appropriations as may be required together with the value, as deter- mined by the Administrator, of supplies and equipment transferred to the Administrator less any liabilities assumed on account thereof. In our report to the Congress dated March 6, 1963 (B-115369), on the "Finan- cial Advantages of Purchasing over Leasing of Electronic Data-Processing Equip- ment in the Federal Government," we pointed out that there is need in the Federal Government for an effective mechanism. to coordinate and control the purchase, lease, maintenance, and utilization of EDP equipment. Accordingly, we recommended to the President of the United States that he establish such an office in his organization. We are of the opinion that overall policy guidance and direction of the Government's data-processing programs can be most effec- tively accomplished through the efforts of a small, highly placed central man- agement office in the executive branch of the Government. However, we recognize that there are various ways in which central control can be exercised over the procurement and utilization of this type of equipment. H.R. 5171 pro- vides such an alternate method. We are not opposed to the method set forth in H.R. 5171; however, we feel that the mechanism proposed in H.R. 5171 for carrying out the detailed operations of coordination and control needs to be subject to the policy guidance and overall direction of the office of the President. With reference to the policies and procedures set forth in the bill we offer the following comments for consideration. 1. We suggest that the word "electronic" as used in the bill be deleted and the word "automatic" be substituted therefor in order to place a wider range of equipment within the scope of authority of the General Services Administration. PAGENO="0169" AUTOMATIC DATA PROCESSING EQUIPMENT 165 2. The provisions of H.R. 5171 limit control by the General Services Admin- istration over in house Government electronic data processing equipment We believe that to the maixmum extent practicable such equipment or systems required by contractors in the performance of negotiated contracts with the Federal agencies where the whole or a substantial part of the cost of such equipment or systems would become a part of Government contract prices should likewise be furnished by the Government with title or leasehold interest remain- ing in the Government subject substantially to the same laws and regulations applicable to in-house Government equipment. 3. The bill proposes to establish an electronic data-processing fund for carry- ing out the functions enumerated therein to be "available without fiscal year limitation This method of financing not requiring annual congressional au thorization-as compared with budgetary and appropriation processes followed in financing activities through annual appropriations-would materially diminish congressional control over such activities and should not be permitted in the absence of justifiable need therefor. It is our opinion that an annual congres- sional review of operations under the fund and affirmative annual congressional authority in respect of the availability of the fund is necessary to place the activities of the General Services Administration in this area under complete congressional control. Consequently, we suggest that after the word "limita- tion" appearing on page 2, line 24, there be added "within such amounts as may be provided annually in appropriation acts." 4 We suggest that after a date determined upon existing appropriations and, unless specifically so provided, future appropriations of the agencies con- cerned, other than appropriations to the fund, shall not be available for the purchase, lease, or installation of automatic data-processing equipment of the types taken over by the Administrator. 5. It is oui~ opinion that no executive agency should be exempted from the provisions of the bill except under extraordinary circumstances. 6 We note the terms organization or persons appearing on page 3 line 14 of the bill. If by use of these terms it be intended to authorize the Adminis- trator to make equipment available for, or otherwise supply services to, private organizations or persons, which would constitute an exception to section 3678, Revised Statutes, 31 United States Code 628, requiring the application of appro- priations solely to the objects for which made and no other, in the absence of specific authority to the contrary, then adding the word "private" before the word "organization" would obviate any doubt in the matter. 7. In order to carry out the policy expressed in the bill with reference to the purchase, lease, maintenance, and utilization of electronic data-processing equip- ment we suggest that the President be required to issue regulations to provide for adequate notice to affected agencies, and to assure each such agency inde- pendent review of the Administrator's determination in the event of disagreement with the Administrator concerning such determinations. Similarly, the Admin- istrator of General Services should be authorized to prescribe regulations to effectuate his functions under the bill subject, of course, to the regulations issued by the President thereunder. We believe the enactment of the bill would be in the Interest of the Govern- ment and will result in considerably more economical procurement and utiliza- tion of electronic data processing equipment Therefore and subject to the changes suggested above, we favor enactment of the proposed legislation; If we can be of any further assistance in this matter please advise us. Sincerely yours, JOsEPH CAMPBELL, Comptroller General of the United States. 2. General Services Administration GENERAL SERvIcEs ADMINISTRATION, Washington, D.C., May 27, 1963. Hon. WILLIAM L. DAWSON, Chairman, Committee on Government Operations, House of Ji~epresentatives, Washington, D.C. DEAR MR. CHAIRMAN: You letter of April 1, 1963, requested the views of the General Services Administration on H.R. 5171, 88th Congress, a bill "To author- 99370 0-63-12 PAGENO="0170" . 166 AUTOMATIC DATA PROCESSING EQUIPMENT ize the Administrator of the General Services Administration to coordinate and otherwise provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of electronic data-processing equipment by Federal departments and agencies." The bill would add a new section 111 to title I of the Federal Property and Administrative Services Act of 1949, as amended (5 U.S.C. 630), which would centralize GSA control over all electronic data-processing equipment required by Federal agencies. Financing would be provided by a revolving fund estab- lished by the section. OrIginal capitalization of the fund would be by appropria- tion and transfer of assets, which would be reimbursed through user charges. According to a report of the Comptroller General to the Congress, dated March 6, 1963, entitled "Study of Financial ~&dvantages~ of Purchasing Over Leasing of Electronic Data-Processing Equipment in the Federal Government," there would be very substantial savings to the Government of it purchased more of its requirements for electronic computers instead of leasing as was the case with respect to 86 percent of Federal requirements in the fiscal year 1962. The report recites, as an example, that if 523 of the approximately 1,000 electronic data- processing systems installed or planned for installation in the Government on a lease basis by the end of fiscal year 1963 were purchased instead, potential sav- ings would be about $148 million over a 5-year period and over $100 million annually thereafter. The Comptroller General's report concludes that "the only practical way In which the kind of coordinated management can be practiced to achieve the possible financial savings cited is through the establishment of a small, highly placed central management office in the executive branch of the Government." In order to achieve for the Government the full use potential of automatic data-processing equipment, the requirements for which have shown stupendous growth during recent years, to assure full coordination of procurement by and use within Government, and to obtain for the Government the most economical cost possible, it is essential that centralized management and control over the procurement and use of all such equipment be established. We believe that GSA is not only the logical but the appropriate agency to provide such a central management for the Government. Provision of this service for all Federal agencies by GSA would be consistent with the declared purpose of the Congress In creating GSA to provide for the Government an economical and efficient sys- tern of procurement of personal property and nonpersonal services, including related services such as contracting, the utilization of available property, the disposal of surplus property and records management. The utilization of auto- matic data-processing equipment has become so vital to the successful perform- ance of these and many other functions of Government that they no longer can be successfully handled without the use of such equipment. As the volume of Government transactions required to be handled continues to grow during the ensuing years and as automatic data-processing equipment becomes more technologically sophisticated, its potential for even greater appli- cation in the transaction of Government business affords the principal means by which the ever-increasing volume of Government business may be successfully carried out without proportionate increases in staff costs. At the same time it must be recognized that Government utilization of such equipment either as owner or lessee entails substantial costs. Accordingly, to achieve for the Government the maximum economic benefits from the use of such equipment, it Is highly desirable that prompt action be taken to assure (1) proper economic evaluation of such equipment now in use and proposed in the future; (2) maximum utilization of all such equipment owned or leased by the United States including arrangenients for multiple agency use; and (3) that the total Government requirements for such equipment is fully brought to bear, both as to price and terms, in negotiating contracts with manu- facturers for its use through purchase, lease, or other arrangements. In our judgment the many related purposes can best be achieved through centralization of coordination and control of all aspects of the matter in a single agency. GSA is an organization already existing within Government which possesses considerable know-how* in this complex field and into which pool equipment op- erations and available personnel that may now be fragmented throughout Gov- ernment can be integrated to the extent necessary to provide for the Government an efficient and economical system for the purchase, lease, maintenance, and use of electronic data-processing equipment. Provision of this centralized service PAGENO="0171" AUTOMATIC DATA PROCESSING EQUI1~MENT 167 by GSA would, as previously pointed out, be consistent with the purposes for which GSA was created. We suggest that the word "electronic" wherever it appears in the bill be changed to read "automatic." This change is regarded as desirable to make it absolutely clear that the authority of GSA would extend to complete data-processing sys- tems which may include electronic computers as well as such related items as punchcard equipment and tabulating machines, which, while a part of the sys~ tem, may not technically be withIn the term "electronic." We recommend also elimination of the following language which appears to have been adopted in the proposed bill from the provisions of section 110 of the act and which has no application to automatic data-processing equipment: Page 3, line 10, "less any liabilities assumed"; Page 3 lines 18 and 19 where appropriate for terminal liability changes We construe the authority which would be vested in the Administrator by the first sentence of proposed new section 111 to "control the purchase, lease, mainte- nance, and use" of automatic data-processing equipment by Federal agencies as broad enough to authorize the exercise of such coordination and control through issuance of appropriate regulations applicable not only to such equipment owned or leased by and in the possession of Federal agencies but also to use or services of such equipment in the possession of others and obtained by contract or other arrangement. Costs Incurred by cost-type contractors for acquisition by pur- chase, lease, contract, or otherwise of automatic data-processing equipment or the use thereof required for the performance of such contracts, are costs which are reimbursable by Federal agencies under the terms of such contracts. This constitutes an area of indirect Government utilization of such equipment In- volving, so we understand, substantial cost to the United States. To remove any question as to whether the proposed authority of the Administrator to coordinate and control the purchase, lease, maintenance, and use of automatic data-process- ing equipment encompasses such actions by cost-type contractors where the ex- pense is passed to the United States through reimbursement, it is recommended that the words "or at the expense of" be inserted in line 8, page 1, between the words "by" and "Federal." The budgetary requirements of GSA resulting from enactment of this legisla- tion would be increased to the extent of capital appropriations to the revolving fund for the purchase and lease of automatic data-processing equipment and services. Administrative and staff costs would be recovered through rental charges from the agencies using equipment owned by or leased through the fund. Accordingly, GSA wholeheartedly endorses H.Il. 5171 and urges its early enact- ment by the Congress. The Bureau of the Budget has advised that, while there is no objection to the presentation to your committee of such report as we deem appropriate on H.R. 5171, other affected agencies have expressed serious concern about certain effects of the bill. Further, that the Bureau of the Budget generally shares these concerns and, accordingly, in its separate report on the legislation, opposes the bill's favorable consideration in its present form. Sincerely yours, BERNARD L. BOUTIN, Administrator. 3. Treasury Department TREASURY DEPARPMSINT, Washington, D.C., May 27, 196~3. Hon. WILLIAM L. DAWSON, Chairman, Cosnimittee on Government Operations, House of' Representatives, Washington, D.C. DEAR Mn. CHAUIsrAN: Reference is made to your request for the views of this Department on H.R. 5171, to authorize the Administrator of the General Services Administration to coordinate and otherwise provide for the economic and effi- cient purchase lease maintenance operation and utilization of electronic data processing equipment by Federal departments and agencies. The proposed legislation would vest in the Administrator of General Services all authority to coordinate and control the purchase, lease, maintenance, and use of all electronic data processing equipment by Federal agencies, and to operate or provide for the operation of such equipment. PAGENO="0172" 168 AUTOMATIC DATA PROCESSING EQUIPMENT Five bureaus of he Treasury Department own or lease a substantial number of computers and related peripheral equipment. They serve a variety of pur- poses including accounting for and maintaining the issue and retirement records on savings bonds; collection of revenue; compiling statistics on income; plotting courses for serach and rescue; supply, fiscal and personnel management;. and issuance, payment, and reconciliation of checks. In each instance, the machine was specifically designed or adapted to the function which it performs. Fur- thermore, personnel operating the equipment require special training. The Department has given great emphasis to achieving the most efficient uti- lization of the equipment and of the trained personnel. In addition to making the fullest use required by Treasury operations, the Department permits other Government agencies to use the equipment in periods when it is not required for Treasury programs. We also handle, on a reimbursable basis, the account- ing and reconciliation of the money order system of the Post Office. However, the principal use of, and need for, the equipment remain the responsibility of the Treasury Department. The proposed legislation, by centralizing control of EDP equipment in a single agency, would separate the control of the equipment from the agency having the responsibility for the program for which the equip- ment was specifically designed. The Treasury Department believes that this would be contrary to good managerial practice and to efficient administration. As for the centralized maintenance of the equipment, the Department's ex- perience indicates that it would cost more for Treasury to maintain the equip- ment than it would cost the supplier to furnish maintenance. Centralized main- tenance should not, therefore, be undertaken unless it is clearly demonstrated that on a Government-wide basis it would be more economical than present ar- rangements. Insofar as the centralized procurement of electronic data-processing equip- ment is concerned, the proposed legislation would be unnecessary since the General Services Administration already has authority to do this. At the pres- ent time, the General Services Administration negotiates terms and conditions of computer contracts with suppliers of equipment, hut the prices are set by the supplier and procurement actions are directly between the departments and agencies and the suppliers. In view of the above, the Treasury Department would be opposed to the en- actment of the proposed legislation. The Department has been advised by the Bureau of the Budget that there Is no objection from the standpoint of the administration's program to the submis- sion of this report to your committee. Sincerely yours, G. D'ANDELOT BELIN, General Counsel. 4~ Bureau of the Budget ExECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., May 27, 1963. Hon. WILLIAM L. DAWSON, Chairman, Committee on Government Operations, House of Representative, Longworth House Office Building, Washington, D.C. DEAR Mis. CHAIRMAN: This is in response to your request for a report on H.R. 5171, a bill to authorize the Administrator of the General Services Administra- tion to coordinate and otherwise provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of electronic data-processing equip- ment by Federal departments and agencies. The following is submitted in re- sponse to your request. We understand that a major purpose of the proposed bill is to correct the lease versus purchase situation described by the Comptroller General in his March 1963 report which he based on agency plans for fiscal year 1963. Agency plans for fiscal year 1964, the first effective year for Bureau of the Budget Circular A-54, differ significantly from those for the prior year. In the civil agencies 64 percent of all new ADP acquisitions will either be purchased or, for better budget timing, will be leased with an option to purchase in fiscal year 1965. Additionally, the civil agencies will purchase 18 presently leased computers in fiscal year 1964. Purchase policies and plans for the military departments cur- rently are being reviewed in the Office of the Secretary of Defense. PAGENO="0173" AUTOMATIC DATA PROCESSING EQVfPMENT 169 This trend toward purchasing new APP equipment and purchasing equipment currently leased, creates the necessity for designing procedures for utilizing Government-owned equipment when it is no longer suitable for use by the acquir- ing agency. However, the General Services Administration is making satis- factory progress within its present statutory authority in the development of regulations for the effective utilization of this APP equipment as well as for tak- ing advantage of the Government's equity In leased computers. In the hope that it will be helpful to the committee, we plati to furnish to you in a few days a résumé of the ADP program of the executive branch, indicating its current status and future objectives. This résumé will also describe the wide range of activities, involving the GSA and other agencies, occasioned largely by the fact that the management of our ADP equipment resources is integral to program management in an agency and thus cannot be viewed In the same light as office space, typewriters, or automobiles. In the circumstances, and for reasons outlined in the views letters of the Departments of Defense, Agriculture, Labor, and Post Office, and the Atomic Energy Commission, Federal Aviation Agency, and Tennessee Valley Authority transmitted herewith, the Bureau of the Budget does not favor enactment of H.R. 5171 in its present form. While we do not believe additional legislative authority is necessary, we wiU be glad to work with the committee and with other agencies concerned to develop amended or substitute legislation which might assist in the more effective use of automatic data-processing equipment without creating the problems which we believe are inherent In this bill. Sincerely yours, PITILLIP S. HUGHES, Assistant Director for Legislative Reference. Enclosures. (a) Tennessee Valley Authority TENNESSEE VALLEY AUTHORITY, OFFICE or THE BOARD or DIRECTORS, Knowv'ille, Tenn., April 3(1, 1963. Mr. PHILLII' S. HuGHEs, Assist ant Director for Legislative Reference, Bureau of the Budget, Washington, D.C. DEAR MR. HUGHES: This is in response to your. legislative referral memoran- dum of April 10, requesting our views with respect to HR. 5171, a bill to author- ize' the Administrator of the General Services Administration to coordinate and otherwise provide for the economic and efficient purchase, lease, maintenance, opuration, and utilization of electronic data-processing equipment by Federal departments and agencies. The bill would add a new section to the Federal Property and Administrative Services Act authorizing and directing the General Services Administration to coordinate and control the purchase, lease, maintenance, and use of electronic data-processing equipment by Federal agencies and to operate such equipment or provide for its operation by delegation of authority. The objectives of centralizing such control in GSA, according to the sponsor of the bill, are (1) greater economy in the acquisition of EDP equipment, mainly through purchase thereof in lieu of long-term rental arrangements, and (2) more effective use of such equipment through coordination among the various agencies of the Govern- ment. These are worthwhile objectives with which we, of course, are in accord, but we do not believe additional legislation such as that proposed in H.R. 5171 is necessary to achieve them. In our opinion, the desired economy and efficiency can be obtained through voluntary action by the various Government agencies if the Congress and the administration provide the needed encouragement and funds. Moreover, we are concerned that such centralized control of EDP equipment in GSA might hinder Federal agencies in their use of what has been found to be an important tool in efficient administration and businesslike management. It should be kept in mind that this equipment Is not just another item of office equipment which falls within the recognized scope of GSA's Government house- keeping activities. More and more uses are being found for EDP equipment in carrying out Government programs, particularly in the case of an agency such PAGENO="0174" 170 AUTOMATIC DATA PROCESSING EQUIPMENT as PVA which conducts extensive engineering and business-type activities. TVA has found EDP equipment of immense benefit in carrying out its program of regional development, such as in predicting and controlling the flow of the Tennessee River, in operation of its extensive power system, and in production of fertilizer materials. We believe TVA, which has responsibility for the success of these activities, is in a much better position to determine how and what items of EDP equipment can be used most effectively therein than any central agency operating out of Washington and without such responsibility would be. Actually, as far as these programs of TVA are concerned, they would not appear to be- affected by the provisions of H.R. 5171 since the bill does not alter the existing exemptions under section 602(d) of the Federal Property and Administrative Services Act, but we believe that remote, centralized control of such vital equip-. ment as applied to any agencies is wrong in principle and should be avoided. TVA has given careful attention to economy and efficiency in its acquisition and use of EDP equipment. TVA first acquired an IBM-704 machine several years ago under lease but it was purchased outright as soon as we could determine that it met our needs. Smaller units of EDP equipment have been temporarily leased for special use but these will be replaced with purchased equipment as soon as we can determine with greater preciseness what we need. Also, we have made our EDP equipment available to AEC and other Government agencies when they need it and it can be spared. We see no reason why similar cooperative action should not be taken throughout the Government without additional legislation on the subject. We appreciate the opportunity to comment on the bill. Sincerely yours, AUBREY J. WAGNER, Chairman. (b) Federal Aviation Agency FEDERAL AVIATION AGENcY, Washington, D.C., May 10, 1963. Mr. PHILLIP S. HUGHES, Assistant Director for Legislative Reference, Bureau of the Budget, Washington, D.C. DEAR Mn. HUGHES: This is in response to your request for this Agency's Views on H.R. 5171, a bill to authorize the Administrator of the General Services Ad- ministration to coordinate and otherwise provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of electronic data proc- essing equipment by Federal departments and agencies. This measure would appear to vest complete authority in the Administrator of the General Services Administration to control the purchase, lease, maintenance, and use of electronic data processing equipment by Federal agencies. It is the opinion of this Agency that the establishment of such a highly centralized control over the acquisition and use of EDP equipment is both unwarranted and unwise. We fear that the attendant administrative, coordinative, and restrictive procedures which would flow from this bill would prove to be a serious impedi- ment to the conduct of our air safety programs which rely to a great extent upon the application of EDP. This Agency now makes extensive use of special EDP equipment in air naviga- tion and air traffic control, flight inspection, and related communications systems. As an example, the computer systems used in the air traffic control centers to control movement of aircraft have attached to them specially designed equip- ment to work in conjunction with the computers. This highly specialized equip- ment is built to specifications which are required to satisfy the unique operational requirements for control of movement of aircraft in the air. These computer systems are used 24 hours a day and every day of the year in a "real time" environment. Information fed to the computers comes from various other special system equipment in the center and adjacent control centers, entering the com- puter with no intervention. The computer immediately processes information and displays the information on cathode ray tubes or prints the information on specially prepared paper strips or electromechanical displays for immediate use by the controller in `making decisions relative to control of air traffic. This is but one example of how EDP equipment as used in this Agency is an integral part of an operational system which, to be properly managed, requires Agency control over all physical resources, including EDP equipment. PAGENO="0175" AUTOMATIC DATA PROCESSING EQLYIPMENP 171 While the proposed legislation provides that GSA at Its discretion may delegate eertain of its authority to other agencies, this is not satisfactory assurance that we will have the clecisionmaking latitude which we believe is necessary to carry out our statutory responsibilities in the most efficient and economic manner possible. In order to continue improving the control of air traffic and Other highly specialized functions, we must retain full responsibility and authority over the design, installation, and maintenance of these complex systems. It has been necessary for us to develop a highly trained staff with operational, pro- graming, and technical skills who keep abreast of these constantly changing requirements and recommend the basic decisions necessary for the development of this system. We do not believe it would be feasible for GSA to develop the substantially duplicate staff required to perform or supervise the performance of this activity. We certainly recognize the necessity for coordination and control of EDP pro- grams and many agencies, including FAA, have established centralized control of the acquisition and application of EDP equipment within their own organiza- tions. This is in recognition of the large amounts of money involved, the need for maximum utilization of the equipment, the scarcity of trained persor'nel, and the need to integrate data systems for overall management purposes. These reasons which exist within the agencies, also apply to the Government as a whole. H.R. 5171 suggests, however, that no mechanism now exists for providing cen- tral coordination of EDP activities throughout the Government. This is not the ease. As you know, the Bureau of the Budget presently provides Government- wide coordination and control through the normal budget processes and by pre- scribing basic policies and standards for acquisition and joint use of EDP facilities. Simply transferring this responsibility to GSA would result In no apparent advantage to the Government. To the contrary, we believe it would only result in the creation of an additional overhead group and additional delays in reaching decisions and implementing programs. In transferring responsibility to GSA, the subject bill would also substantially expand, and alter the nature of the coordination and control mechanisms now existing. It would inject GSA into all matters relating to EDP, Including opera- tion, utilization, transfer, multiple use, and even agency organization. These are areas where the Individual agencies must have considerable discretion and authority if they are effectively to carry out their statutory functions. We do not suggest that there should be no external review or evaluation of an agency's performance in this area. The General Accounting Office is currently carrying out this function and, we would assume, in a satisfactory mqnner. There would appear to be an advantage in the establishment and operation of EDP equipment pools for joint use by Government agencies, although we do not know that additional legislative authority would be required for this purpose. Similarly, the establishment of an EDP capital fund would appear to have ad- vantages if the agencies were in a position to charge acquisition costs against the fund with appropriate arrangements for GSA to bill agencies for the use of equipment in order to reimburse the fund However if to accomplish this individual agencies must justify and obtaIn approval from GSA for acquisition of the equipment, any advantage would hardly be worth the additional burden and cost. The basic decisions as to acquisition and use should continue to be made within the framework of budgetary justifications and standards and policies established by the Bureau of the Budget. There are further improvements in the EDP area which GSA could effect under existing authority. GSA is now negotiating Government-wide contracts with computer manufacturers. These negotiations have concentrated on the terms and conditions of use of the equipment and significant benefits to the Government have accrued. To date, however, GSA has not attempted to nego- tiate rental cost with manufacturers. For example, agencies are still generally required to pay approximately 40 percent of the basic shift rental for equipment use in excess of 176 hours per month. As a user, it is difficult for us to see the justification for this charge since the equipment Is not subject to the same deterioration through use as is mechanical or electromechanical equipment. With GSA's present authority for contract negotiations, we feel they should take the initiative in negotiating equipment rental costs with manufacurers. In this connection, any significant reduction In rental for extra shift use would .tend to reduce the cost advantages of purchase. PAGENO="0176" 172 AUTOMATIC DATA PROCESSING EQUIPMENT To summarize, we believe each agency, and the Government as a whole, should continue to explore and adapt mechanized processes wherever possible in order to conserve personnel resources and otherwise improve the efficiency and economy of Government operations. The control procedures established to assure that the use of EDP equipment proceeds wisely and economically should be simplified wherever possible. We are convinced that H.R. 5171 would accomplish the opposite result. There is involved in EDP much more than a simple procurement and property utilization problem. The state of the art in aviation, for example, is evolving very rapidly. The questions as to how, when, and where to utilize EDP in the performance of our mission are so intricate it would be virtually impossible for a central agency to compose a staff capable of supervising and second-guessing the decisions which must be made. Undoubtedly, this is true in many other agencies. If the existing controls over the acquisition and use of EDP equip- ment as exercised by the Bureau of the Budget and the General Accounting Office are found to be inadequate, a much less drastic remedy should be explored. Sincerely, N. E. HALABY, AdmInistrator. (c) Atomic Energy Commission U.S. ATOMIC ENERGY CoMMIssIoN, Washington, D.C., May 22, 1963. Hon. KERMIT GORDON, Director, Burean of the Budget. DEAR Mn. GORDON: Reference is made to Mr. Rommel's legislative referral memorandum of April 10, 1963, transmitting H.R~ 5171, a bill "To authorize the Administrator of the General Services Administration to coordinate and other- wise provide for the economic and efficient purchase, lease, maintenance, opera- tion, and utilization of electronic data processing equipment by Federal depart- ments and agencies." By amending the Federal Property and Administrative Services Act of 1949, as amended, this bill would authorize the Administrator of the General Services Administration to control the purchase, lease, maintenance, and use of electronic data processing equipment by Federal agencies with the proviso that the Admin- istrator, in his discretion, may delegate this authority in three broadly defined classes of cases. In addition, the bill would establish on the books of the Treasury an electronic data processing fund for the various expenses involved In the coordination operation and utilization of such equipment by and for Federal agencies. The fund is to be credited with advances and reimbursements from available appropriations and funds of any agency in the amount of the cost, as determined by the Administrator, of the equipment and services rendered to the agency. We recognize considerable merit in the bill's objectives of centralizing and simplifying the acquisition, maintenance, and use of electronic data processing equipment, with economies possibly resulting to the Government. Nevertheless, the Atomic Energy Commission considers H.R. 5171 unacceptable in its present form for the reasons stated below. The Atomic Energy Commission now has electronic data processing equipment representing an investment of more than $60 million. Such equipment is used by the Commission for the most part for scientific and technical purposes, par- ticularly in connection with development, testing, and production of weapons and reactor research and development. In these areas electronic data processing equipment requirements are so inextricably linked to the intended use that only the user is able to develop the specifications for and determine the types and configurations of equipment needed. The use of this equipment is so tied in with the Commission's exercise of its statutory responsibilities that we firmly believe coordination and control of the use of such AEC equipment by another Government agency could seriously interfere with the functions of the Commission. We note that the bill would authorize the Administration "to require joint utilization of such equipment by two or more Federal agencies, and to establish equipment pools and data processing centers for such joint use when necessary for its most efficient and effective utilization." Inasmuch as the Commission has specific statutory responsibility under the Atomic Energy Act of 1954, as amended, with respect to security of certain classes of information, which could PAGENO="0177" AUTOMATIC DATA PROCESSING EQUIPMENT 173 come into conflict with actions of the Administrator directing joint utilization or pooling arrangements, the mandatory nature of this provision could be in conflict with the Commission's responsibility for safeguarding information. For this reason we oppose the provision giving the Administrator authority to require joint utilization or pooling arrangements. Another complication raised by the proposed bill is the fact that most of the procurement and utilization of electronic data processing equipment is accom- plished for the Commission through its many contractors rather than by the AEC directly and in many of these situations the highly specialized nature of the equipment needed prevents orders being placed under Federal supply sched- ules. The Commission could not take over these procurement and utilization functions from its contractors without dislocating its present method of conduct- ing major portions of its programs through its contractors, with resulting prob- lems which in administrative and staffing implications alone could outweigh any economies the bill might otherwise permit. It would, of course, not be feasible or consistent with contractural relationships, and would not be contem- plated by the bill as we understand it, for another agency to attempt to exercise control over AEC contractors. We have no objection to an expansion of the activities of the AdminIstrator in entering into open-end contracts for the purchase of electronic data processing equipment which the various Federal agencies will be free to avail themselves of when they believe that the contracts meet their needs and specifications. In essence the Atomic Energy Commission believes that the connection between Its procurement and uses of electronic data processing equipment and the ful- fillment of its appointed tasks is so essential as to make it incompatible with the Atomic Energy Act to place this procurement and use under the control of another agency. Accordingly, we oppose the passage of H.R. 5171 as it applies to the Commission. Sincerely yours, Dwi~nr A. Ixic, Assistant General Manager. (d) Post Office Department OFFICE OF THE POSTHASTER GENERAL, Washington, D.C., Ma~ 9, 19d3. Hon. KERMIT GoRDoN, Director, Bureau of the Budget, Washington, D.C. DEAR Mn. GORDON: This is in reply to the request of the Assistant Director, Legislative Reference, for the views of this Department with respect to H.R. 5171 To authorize the Administrator of the General Scrvlces Administration to coordinate and otherwise provide for the econonac and efficient purchase lease maintenance, operation, and utilization of electronic data processing equipment by Federal departments and agencies." The Post Office Department does not favor the establishment of a central con- trol organization for the procurement or management of electronic data proc- essing equipment for all Federal agencies The use of electronic data processing equIpment is vital to the day-to-day conduct of the Post Office Department business and is considered to be an essential administrative sanction of the Department. While the bill would permit the Administrator of General Services Adminis tration, in his discretion, to delegate the control of electronic data processing equipment in certain cases we believe that because an exceptionally high degree of responsiveness to the data processing needs of the Department is required, it is imperative that all phases of administrative management of the equipment personnel, job schedules, and contact with vendors remain under the direct control of the Postmaster General or his designated representative. This Department is currently participating in the experimental regional sharing plan for electronic computers sponsoled by th~ Bureau of the Budget The Department intends to continue in this eftort in order to help secure maxi mum utilization of data processing equipment However it is not considered advisable to relinquish authority over the management of this function since data processing services are fundamental responsibilities of the Postmaster GeneraL PAGENO="0178" 174 AUTOMATIC DATA PROCESSING EQUIPMENT This Department would not be opposed to the establishment of an electronic data processing fund provided such fund is available for the purchase of elec- tronic data processing equipment If an economic evaluation of the relative costs of lease against purchase Indicates that it is to the best advantages of the Gov- ernment to purchase equipment and further, that the fund is available to support extraordinary one-time expenses for data processing services which may from time to time occur. Sincerely yours, FRBDERICK C. BaLEN, Acting Postmaster General. (e) Department of Labor U.S. DEPARTMENT OF LABOR, OFFICE OF THE SECRETARY, Washington, May 17, 196~. Hon. KERMIT GORDON, Director, Bureau of the Budget, Ea'ecutive Office of the President, Washingten, D.C. DEAR MR. GORDON: This is in response to your request for the views, of the Department of Labor on H.R. 5171, a bill "to authorize the Administrator of the General Services Administration to coordinate and otherwise provide for the economic and efficient purchase lease maintenance operation and utilization of electronic data processing equipment by Federal departments and agencies." This Department is keenly interested in the efficient utilization of automatic data processing equipment. However, we doubt that this will be best achieved by the enactment of H.R. 5171. Much progress has been made in dealing with ADP problems in recent years. The establishment of a unit in the management office of the Bureau of the Budget has provided leadership for an overall Federal program. Over the past 2 years, the development of a departmentw!de ADP program in the Department of Labor has begun to show results. Not only have internal central ADP sbrvices been set up, but the Department Is performing work for other agencies and has utilized other Federal agency systems for its own ADP needs. Representatives of this Department have also participated In an interagency committee sponsored by the Bureau of the Budget. As you know, the express purpose of this committee is to develop more agency expertise in ADP and create a greater awareness of the need for intragovernmental cooperation, including the sharing of equipment and the exchanging of technical assistance. It is our position that the objectives of H R 5171 would be best effected through the continued improvement of our internal AD? program and through the con- tinued leadership of the Bureau of the Budget s ADI? staff with special emphasis on Interagency sharing possibilities and a careful analysis of rental-purchase arrangements. In our opinion, the continuance of the procedures we are now following involve less cost to the Governn~ent and to the individual agencies than would the estab- lishment of a new organizational unit to perform essentially the same functions. The creation of such a new unit would not only be expensive, but would also create many complex administrative problems and possibly adversely . affect agency operations. It would be virtually an impossible task for GSA or any agency to maintain ob)ective control over the scheduling arrange for the Joint use of systems including all of its administrative ramifications, make decisions on the transfer of equipment in and out of agencies allocate funds and/or make charges for AD? personnel, supplies and equipment usage, and at the same time satisfy the basic requirements of each agency. For the foregoing reasons, we would not favor the enactment of H.R. 5171. Yours sincerely, W. WILLARD WIRTZ, Secretary of Labor. PAGENO="0179" AUTOMATIC DATA PROCESSING EQUIPMENT 175 (f) Department of Agriculture DEPARTMENT or AGRICULTuRE, Orricu OF TEE SECRETARY, Washington, May 16, 1968. Hon. KERMIT GORDON, Director, Bureau of the Budget. DEAR Mn. GORDON: This is in reply to the Mr. Rommel's request of April 10, 1963, for a report on HR. 5171, a bill "to authorize the Administrator of the GSA to coordinate and otherwise provide for the econ~mic and efficient purchase, lease, maintenance, operation, and utilization of electronic data-processing equipment by Federal departments and agencies." We agee with the objectives of this bill; however, we do not believe that legislation is required to accomplish those objectives. In Agriculture we have established three department computer centers The Secretary has announced that a fourth is to be established. These centers, which are operated by agencies of the Department, serve all organizations within the Department. This sharing provides accessibility to electronic data-processing equipment and experienced personnel at reasonable costs-yet the common di- rection, under the Secretary of Agriculture, of equipment, personnel and users, provides a manageable operation. Small-scale computers are being made available to our scientific personnel at laboratories, engineering and research installations. This approach places another tool in these installations. There, the use of a computer can be a means of increasing the effectiveness of the available man-hours of personnel who are in very short supply. The field of electronic data processing has advanced very rapidly in the 7 years since this Department installed its first computer-it is still developing at a tremendous rate. The rate of advancement In the use of EDP equipment is more dependent-today-on the design of systems gaining acceptance pro- graming and installation than on the equipment However the success of these acti~ ities is closely dependent upon the confidence of program personnel that electronic data-processing equipment and personnel will perform as planned. This can be obtained most readily when the management of EDP and the user are within the same department. This bill would provide an electronic data-processing fund for purchasing computers. This objective is most desirable. This bill would permit the establishment of centers which could be used by organizations that do not have sufficient work to fully use a computer. We use time on computers of other departments, such as the Treasury Department and the Weather Bureau. The sharing of a computer by small users Is being accomplished by the Philadelphia computer sharing project sponsored by the Bureau of the Budget. Thus, this objective of the bill is now being met in three ways- department computer centers bilateral department arrangements to share equipment, and the Bureau of the Budget sponsored multidepartment equipment sharing project. This bill would provide central control over the purchase or lease of EDP equipment. This is now provided by Bureau of the Budget standards covering any acquisition of computers. GAO audits of compliance and of utilization of equipment provide for the enforcement of these standards Considerable data is transmitted to computers. This, in most cases, we be- lieve would continue even though computers were available at many locations. The cost of dual maintenance of programs of different computers wou1d be an offsetting factor to any data transmission cost reduction An1 any stanclardiza tion of equipment which c~nld eliminate dual programing would be to the disadvantage of the small EDP manufacturer. For these reasons it appears that the objectives of the bill are being ac complished and that the bill, as proposed. would result in a decrease rather than an increase in the rate of placing work on EDP equipment. Sincerely, CHARLES S. MURPHY, Under Secretary. PAGENO="0180" 176 AUTOMATIC DATA PROCESSING EQUIPMENT (g) Department of Defen,,se GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE, Washington, D.C., May 21, 1963. Hon. KERMIT GORDON, Director, Bureau of the Budget. DEAR MR. GORDON: Reference Is made to your request for the views of the Department of Defense on H.R. 5171, a bill "to authorize the Administrator of the General Services Administration to coordinate and otherwise provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of electronic data processing equipment by Federal departments and agencies." H.R. 5171 would add a new section 111 to title I of the Federal Property and Administrative Services Act of 1949. The new section would authorize and direct *the Administrator of General Services to coordinate and control the purchase, lease, maintenance, and use of electronic data processing equipment by Federal agencies and to operate or authorize the operation of such equipment. The Administrator would be authorized to transfer such equipment between agencies, to require joint utilization by two or more agencies, and to establish equipment pools and data processing centers for joint use. In his discretion, the Ad- ministrator could delegate authority to lease, purchase, maintain, or operate (1) general classes of equipment; (2) equipment of special design needed to fulfill some unique requirement or special purpose of a particular agency; and (3) equipment necessary for national defense and security. The legislation would establish on the books of the Treasury an electronic data processing fund to be available for the above purposes. Such fund would be credited with advances and reimbursements from available appropriations and funds of any agency utilizing equipment and services furnished it, and with re- funds or recoveries resulting from operations of the fund. Advances and re- imbursements would be based on rates determined by the Administrator which would approximate the costs thereof met by the fund. The Department of Defense is strongly opposed to H.R. 5171. One of its effects would be to place the Administrator of General Services in the position of determining the requirements of the Department of Defense for electronic data processing equipment. Further, it would place him in control over the use of such equipment by the Department, including authority to direct its trans.fer to other Federal agencies in his discretion. Electronic data processing equipment performs vital functions in connection with the defense mission. It is employed in intelligence, scientific and engi- neering fields, weapons fire control systems, tactical military field operations, war gaming, damage assessment, communications, and logistics operations. These systems are designed and installed to be responsive to the operational needs of commanders responsible for functions essential to the defense mission. For example, in the operation of the base supply account at most Air Force bases, electronic data processing systems are used to permit the immediate satis- faction of priority requests for repair parts. Any delay in such supply action may result in the grounding of weapon systems. In this case, the management and operation of the supply functions on a computer have become as integral a part of base operations as procedures on the flight line and in the maintenance hangar. In the operation of the military supply system at the wholesale level, elec- tronic data processing systems are being used extensively to furnish data neces- sary for making decisions at inventory control points. Such data are used in determining requirements for repair parts and components to support weapon systems, procuring materiel, scheduling and managing the rebuild of weapon systems, and filling demands for supplies on a worldwide basis. Responsibility for the design of such data systems and the requisite computer capabilities, to- gether with the accumulation of source data and operation within established performance standards and priorities, cannot be assigned to an agency outside the Department of Defense. This management responsibility is necessary for effective control of operating Defense programs. Similarly, programing and operation of computers installed to support intelli- gence and war gaming activties require the collection and storage of masses of classified Information. Responsibility for the collection of data and timely op- eration of these electronic data processing systems Is inextricably associated PAGENO="0181" AUTOMATIC DATA OCESSING ~tIr~NT 177 with the performance of the intelligence and war gaming functions. With re- spect to such applications it is inconceivable that responsibility and authority for the determination of requirements and the use of electronic data processing equipment should be vested in an agency outside of the Department. The vital role played by ADP equipment in the management and operation of Defense programs has caused the Secretary of Defense to establish controls over the selection., acquisition, operation, and utilization of such equipment through- out Defense. As prescribed by DOD instruction 5105.11, dated January 2, 1957, Subject: "Responsibility for Application of ADP Systems to Business Proced- ures," a senior policy official in each military department and agency has been designated to monitor the development of systems in this area. All requests for the acquisition of electronic computers for business data processing systems are submitted to the Office of the Secretary of Defense for review and approval. In the review and approval process, both at the military department and Office of the Secretary of Defense level, care is exercised to see that the need is valid and that It cannot be satisfied through use of an existing Defense installation. Pro- cedures have been established to assure that all new computers are acquired on the basis of competitive bidding, in order that the most economical and effective alternative is followed in selecting from available ADP capability. A program of readiness reviews and performance evaluations has been used to monitor the management and utilization of these systems. Concern with the development of effective and economical data systems has resulted in DOD projects for standard procedures, codes, and programing techniques. It is estimated that by June 30, 1963, over 800 computers will be Installed sup- porting Defense programs-exclusive of tactical and classified applications. These electronic data processing systems cost approximately $350 million In rental and supporting personnel. The size of this DOD program alone warrants close management surveillance by the Secretary of Defense. The integral part which these computers play in Defense managerial and operational systems makes this control a mandatory responsibility of the Secretary of Defense. It is pointed out that electronic data processing equipment is now acquired from general schedules issued by the Administrator of General Services. The Department of Defense provides substantial technical support to the GSA in the execution of these contracts. The Department supports the cintinued use of GSA general schedules. Since GSA experience in this field is extremely limited (confined to 10 installations on a relatively small management application) It is assumed that the technical support rendered by DOD would still be required, and such support is assured. With respect to the matter of lease versus purchase, this Department is in full support of the objectives of purchasing computers on the basis of maximum economic advantage to the Government and agrees that where technology in this field has become stable, substantial cost benefits may be achieved through more extensive purchasing of these equipments. In this respect, the military departments and defense agencies have been in the process of evaluating for the past several months the advantages of the various methods of acquisition; i.e., purchase lease or lease with option to purchase (on an Item by item basis) for all Installed equipment. This reappraisal is in consonance with DOD policies and BOB Circular A-54, and is scheduled for completion during May 1963. In conclusion, performance of such responsibilities for the management of electronic data processing equipment by the Department of Defense is a pre- requisite to the control of operating programs. Therefore, the Department op- poses H.R. 5171 which would vest such responsibilities in another agency. Sincerely, IOliN P. MONAUGHT0N. 0 PAGENO="0182" PAGENO="0183" PAGENO="0184"