REPORT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP67B00446R000600050003-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 75
• Document Creation Date: December 19, 2016
• Document Release Date: August 30, 2005
• Sequence Number: 3
• Publication Date: October 22, 1965
• Content Type: REPORT

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89TII CONGRESS SENATE EPORT
1st Session No' 938
AMENDING TITLE I OF THE FEDERAL PROPERTY AND ADMINIS-
TRATIVE SERVICES ACT OF 1949 TO PROVIDE FOR TIIE ECONOMIC
AND EFFICIENT PURCHASE, LEASE, MAINTENANCE, OPERATION,
AND UTILIZATION OF AUTOMATIC DATA PROCESSING EQUIPMENT
BY FEDERAL DEPARTMENTS AND AGENCIES
Mr. JACKSON, from the Committee on Government Operations,
submitted the following
REPORT
The Committee on Government Operations, to which was referred
the bill (H.R. 4845) to amend title I of the Federal Property and
Administrative Services Act of 1949 to provide for the economic and
efficient purchase, lease, maintenance, operation, and utilization of
automatic data processing equipment by Federal departments and
agencies, having considered the same, reports favorably thereon with-
out amendment and recommends that the bill do pass.
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I. PURPOSES OF THE BILL
The findings on the impact of ADP previously reported
herein indicate that dynamic leadership of the AD1 pro-
gram of the Federal Government is a vital necessity.
Passive, partial, or informal types of leadership have had
their place, but have now outworn their usefulness.'-
1959 Bureau of the Budget Automatic Data Processing
Res pon8ibilities Study.
After 6 years, the type of leadership the Bureau of the Budget
(BOB) recommended in this early automatic data processing (ADP)
management study has yet to be realized. This legislation would
establish the authority and provide the operational machinery needed
for the effective and efficient management of this costly equipment.
During the years following issuance of the BOB's 1939 ADP study,
the Comptroller General has issued approximately 100 audit reports
severely critical of Government ADP management. Over the years,
he has continuously emphasized and demonstrated the. need for Gov-
ernment-,vide coordination in ADP management. Federal ADP ex-
p nditures now exceed $3 billion annually and the Comptroller Gen-
eral conservatively estimates with regard to the equipment coming
within this management program that approximately l$200 million a
year can be saved through the use of long recognized and accepted
management techniques provided in this legislation.
This committee recommended similar legislation to the House on
June 19, 19G3 (H. Re t. 428, 88th Concr., 1st sess.), and that legislation,
as amended (11.11. 5171) ,was approve July 18,1963.
II. SUMMARY
The Federal Government is the largest user of ADP in the world
with annual expenditures exceeding $3 billion or approximately 3 per-
cent of the Federal budget.. There are now an estimated 2,000 com-
puter systems in use in the Federal Government..
lVhati8ADP?
Automatic data processing (ADP) is the concept whereby a machine
or computer can accept information or "input data," process the data
according to a predetermined "program," and provide the results in a
usable form.
Data processing computers are either analog, which measure "how
much," or digital, which calculate numbers or compare nonnume-rical
data encoded in digital form. Most ADP in use is digital in design,
and it is this type of equipment that is the principal concern of the
legislation.
The heart of an ADP system is the processor or "main frame" which
contains the complex electronic circuits which accept and process data.
The processor in conjunction with input, output, and storage com-
ponents such as a tape unit., a card punch, a memory component, a
printer, and so forth, make, up a computer system. The system is
"designed" or "configured" by combining various of these mass pro-
duced components, the combination depending on the particular needs
I "Report of r~ indinea Find Reeommoadationa Ro.uittng From the Automatic Data Proces-
aine (ADP) ReAponatbttittes Study. Beptrmbor 1058-3unv 1959." Bairoau of the Budget,
p. 20. Reprinted in hearings on H.R. 4845, 89th Cong., lot.eess., p. 590.
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AUTOATIC of the user. Most components are general purpose in design and the
system can be programed to perform various functions. About 90
percent of the computers in Government are general purpose. In ad-
dition to the "hardware," the user must also obtain the instructions
and procedures needed to operate the system. These are called "soft-
ware" and often constitute a substantial portion of the cost of an ADP
system.
The technological evolution of ADP has entered the third genera-
tion. The first generation equipment contained electronic vacuum
tubes while the second generation equipment introduced solid state
transistors. The third generation will integrate ADP with communi-
cations systems whereby central computers of high capacity will supply
the needs of many users. Overall equipment costs will be substantially
higher but unit processing costs to the individual user will be markedly
reduced. As third generation time-sharing increases, the traditional
agency-by-agency structure of the Government in terms of ADP man-
agement will become less apparent and less important and the costs
of any deficiencies in Government ADP management will reach stag-
gering proportions.
Current Government ADP management techniques
In the 1950's, existing management policies applicable to calculators,
punched card, and other office equipment were extended to ADP.
Bureau of the Budget (BOB) concern over ADP management was
usually limited to the annual agencywide budget review processes.
In 1958, however, BOB began a comprehensive Government "ADP
Responsibilities Study" concluding that "dynamic leadership" in Gov-
ernment ADP management was a "vital necessity." The study recog-
nized the need for specialized management of ADP, for Government-
wide coordination, and for accurate up-to-date information for all
levels of management. A subsequent BOB study in 1965 recognized
many of these same deficiencies.
Despite recognition of this need for a change in the concept of ADP
management as reflected in the 1959 BOB study, overall Government
management was limited to the issuance of advisory "guidelines" to
the various agencies by BOB. Guidelines and bulletins have been
issued on ADP feasibility studies, lease versus purchase evaluations,
inventory reports, and sharing programs.
Since 1959, the General Accounting Office (GAO) has issued about
100 audit reports revealing serious shortcomings in the acquisition
and use of ADP in various departments and agencies as well as ADP
acquired under cost reimbursable contracts at the expense of the Gov-
ernment. Most of the deficiencies constituted violations of BOB
guidelines.
The need for Government-wide coordination in ADP management
Coordination is fundamental to good management, as has been
proved in Government and business numerous times. The Secretary
of Defense has applied this concept to a number of functions of DOD
achieving significant improvements.
On four occasions, in 1958, 1960, 1963, and 1964, the GAO has sub-
mitted comprehensive ADP management studies to Congress illustrat-
ing the improvements that can be made through Government-wide
coordination in ADP management. The studies, backed up by the
specific findings of mismanagement as illustrated in almost 100 other
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audit reports, support the proposition as embodied in II.R. 4845 that
certain aspects of Government ADP management be coordinated on
a Government-wide basis. Through this approach, the Comptroller
General conservatively estimates with regard to the ADP equipment
that would come within this management program that savings of
between $100 million and $200 million annually will be realized-
without compromise in user agency selection or use of equipment.
Effective Gavernm.ent-wide management of ADP provided by H.R.
181.5
II.R. 4845 delineates the responsibilities of BOB, GSA, and the De-
partinent of Commerce and provides a stronger organization plan for
Government ADP inanagenient., The bill maintains BOB's traditional
control over fiscal and policy matters. Action by any agency under
this le 'slat ion would be subject to either approval or review by BOB.
GSA, in line with its traditional authority, is delegated operational
responsibilities for coordinating Government ADP under IT.R. 4845.
GSA would administer an ADP "revolving fund" which should pro-
vide (1) more adequate management information, (2) optimum utili-
zation, and (3) economic acquisition of Government ADP.
The National Bureau of Standards would offer technical support
to the management program and will work toward ADP compatibility.
The authority in this legislation would supplement the Government
research effort in coordination with other Federal agencies.
H.R. 4845 would provide a continuous flow of recurring data needed
for effective and efficient management
Presently BOB issues only an annual inventory report wholly in-
adequate for ADP management pur~uses. Inventory and fiscal in-
formation is needed to maintain policy and budgetary control, in-
crease utilization, and provide more economical acquisition of equip-
ment.. Under this legislation, GSA would establish such a compre-
hensive inventory. This inventory coupled with the fiscal information
flowing from the operations of the "revolving fund" would afford all
levels of Government with more adequate information necessary for
effective and efficient management.. The availability of information
on prospective Government requirements should also provide for
fairer competition among all ADP manufacturers.
Optimum utilization of Government AD?
There is widespread waste in available but unused Government ADP
equipment time. On June 16, 1964, BOB set up an ADP sharing pro-
gram under GSA. This legislation would, however, substantially im-
prove the effectiveness and efficiency of GSA's interagency coordinat-
ing efforts. GSA would also be authorized to establish multiagency
service centers to furnish ADP capacity to several users.
More economic acquisition of ADP
This legislation would strengthen the Government's bargaining posi-
tion in acquiring ADP. The Government now obtains no special ad-
vantages as a volume purchaser. Under the GSA supply schedules,
price determinations and procurement are divorced. To obtain volume
discounts, the Government must have volume procurement rather than
a piecemeal agency-by-agency procurement.
The traditionally accepted solution to this type of problem has been
the "single purchaser" concept. The Government would be in a
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AUTOMATIC DATA PROCESSING EQUIPMENT 5
stronger bargaining position were all its ADP purchase and lease
money in "one pocket." Whenever feasible general purpose com-
ponents, including those used in specially designed ADP systems,
would be acquired under a volume procurement program. Government '
software acquisition could also be subjected to more orderly procure-
ment procedures.
The revolving fund would be used to consolidate volume acquisitions.
GSA would acquire the ADP systems selected by the management of
the agencies and, in effect, the agencies would then lease equipment
from the GSA revolving fund reimbursing the fund periodically at
rates reflecting the use value of the equipment. GSA could obtain
direct appropriations covering overhead expenses incident to oper-
ating the revolving fund.
Useful life to the Govern rent as a whole
In addition to volume procurement, Government-wide coordination
would provide an effective means for making "lease versus purchase"
evaluations on the basis of the benefit to the Government as a whole.
Lease versus purchase evaluations should be made from the standpoint
of the estimated useful life of the equipment to the Government as a
whole rather than the estimated period of application of the initial user
agency. At this time, lease payments generally equal the cost of owner-
ship within 21/2 to 41/2 years although the useful life of most ADP
equipment is estimated at between 5 and 10 years. The Government
has countless needs for ADP and the GAO logically suggests that
the estimated period of application by the initial acquiring agency
may not constitute a realistic estimate of the economic useful life to
the Government as a whole. It is not unrealistic that officials cogni-
zant of Government inventories and needs could not, on a sound, busi-
nesslike basis, attribute secondary usage potential to selected systems
which have long-range utilization within the Government. Too often,
at present, the Government in a period of from 2 to 5 years pays rentals
approximating or even exceeding. the purchase rice-but ends up not
owning the equipment which might have considerable economic life
in it. And, assuming that some further utilization did not develop,
the Government could get the benefit of some return on investment
through the sale of the equipment as surplus property.
The revolving fund would have other advantages. As an example,
those systems with the highest comparative purchase advantage for the
Government as a whole could be purchased while systems offering less
purchase advantage could be leased. There may not always be suffi-
cient capital for the Government to purchase all its ADP which should
be purchased. Budgetary considerations and funding problems in the
agencies should not interfere with the purchase on a priority basis of
that equipment having the greatest purchase advantage.
Exemptions for national security and defense
H.R. 4845 is aimed at general purpose commercially available ADP
systems and components. Specially designed components forming a
part of tactical weapons or space systems which have no general pur-
pose applicability are not involved in this program. However, gen-
eral purpose commercially available ADP components used in con-
junction with specially designed components and as parts of systems
with unique scientific, cryptologic, or military applications would
come within provisions of this legislation for acquisition, inventory
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6 AUTOMATIC DATA PROCESSING EQUIPMENT
control, and potential secondary usagc although such components or
systems might not be available for sharing.
The Administrator of GSA is authorized to exempt individual sys-
tems from provisions of this program to avoid compromise of our na-
t.iolial security or defense and to assure economy and efficiency. As this
entire management program would be under the policy control of the
BOB and the express direction of the President, it is not necessary or
advisable to authorize discretionary authority in agency heads to ex-
empt equipment from the program. The Administrator is further au-
thorized to delegate authority extended him under this legislation to
the extent he considers necessary and desirable for the orderly imple-
mentation of the program.
Conclusion
This legislation is essential to effective Government ADP manage-
ment.. Based upon. two comprehensive BOB Al)? management stud-
ies, about 100 General Accounting Office, audit reports, and 3 -years of
active investigation by this committee, the time has come for Congress
to take reasonable but effective action to assure the establishment of
efficient ADP management in Government,
III. DISCUSSION
The Federal Government is the largest user of automatic data proc-
essing in the world. Annual Federal ADP expenditures exceed $3
billion, or approximately 3 percent of the Federal budget.. The tax-
payers' present investment in ADP is unknown. But, at this time,
At?P usage in the Government is doubling about every 3 years and
is expected to increase indefinitely.
The first all-electronic computer was constructed during World War
II and delivered to the Army Ordnance Corps in 1945. UNIVAC 1,
the first computer with general data processing capability, was in-
stalled at the Bureau of the Census in 1951. In 1954, there were 10
computer systems in operation within the Federal Government, By
1962, the number had increased to 1,000. There are now at least 2,000.2
And, these figures do not include an estimated 1,000 'to 2,000 systems
contractors have either leased or purchased at the Government's ex-
pense. Nor do these totals include computer components forming a
part of tactical weapons and defense systems or operational elements
in missile and space vehicles which are not included under this manage-
ment program. A. WIIAT Is ADP 2
Automatic data processing is the concept whereby a machine or com-
puter can accept information or "input data," process the data accord-
ing to a predetermined "program," and provide the results in a usable
form. In an automatic data processing system, the electronic com-
puter is the heart or focal point of the system. An ADP system con-
sists of a number of components including input, processing, storage,
and output devices. Data processing computers are either analog or
digital ih design.
' 1964 Inventory of Automatic Data Processing Equipment In the Federal Government,
Bureau of the Budget, July 1904.
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AUTOMATIC DATA PROCESSING EQUIPMENT 7
ANALOG COMPUTERS
Analog computers measure "how much." Analog computers use,
electric current coupled at times with mechanical devices to simulate
the variable factors of some action, circumstance, or phenomenon
which cannot be effectively measured or evaluated directly, or the fac-
tors of some hypothetical problem or mathematical equation. The
analog computer correlates the relationship between these factors and
furnishes a measure or magnitude (how much) of whatever resultant
the computer operator seeks to obtain. In the past, analog computers
have been principally used in scientific work and make up only a small
percentage of the computers now in use.8
Most computers are digital in design. Digital computers Calculate,
compare, and process information. They are essentially electronic,
arithmetical, calculating machines with the additional capacity to
comppare, arrange, sort, store, and identify data. Digital computers
can be used in any area of human endeavor where computations are
required or information of any kind has to be processed or simulated.
The basic concept of the digital computer has long been recognized
and is relatively easy to understand, but the electronic circuitry and
the manufacturing techniques implementing these concepts are new
and exceedingly complex.
BINARY NUMBERS SYSTEM
Digital computers generally use the binary (base 2) numbers system
rather than the decimal (base 10) system we normally consider as the
only natural approach to arithmetic. Theoretically, a digital coln-
puter might be designed to any numbers base. However, the binary
system is easiest. Only combinations of two symbols, "0" and. "1' ,
are needed to express any number-no matter how large. Under the
decimal numbers system, 10 different symbols are used to represent
the series of magnitudes from zero to nine. Then for magnitudes of
10 and above these same unique number symbols are simply reposi-
tioned. The binary system follows the same approach except that the
reuse of symbols begins with "2" rather than "10", as follows:
Decimal : Binary
0----------------------------------------------------------------
0
1----------------------------------------------------------------
1
2----------------------------------------------------------------
10
3-----------------------------------------------------------------
- 11
4-----------------------------------------------------------------
100
5----------------------------------------------------------------
101
s-----------------?-----------------------------------------------
110
7----------------------------------------------------------------
111
8----------------------------------------------------------------
1000
9------------------------------------------------------------------
1001
.10----------------------------------------------------------------
1010
11-----------------------------------------------------------------
1o11
8 "The 'Assault' on Fortress IBM," Fortune, vol. LXIX, No. 6 (June 1964), p. 207 :
'There is the analog-computer industry, whose 1963 volume was around $45 million ---
whose sales are growing at better than 15 percent a year. he nalog unlike the di ttal
computer does not count sequentially and has no memory, but it compares many quantities
simultaneously, and so provides a swift wayy of looking at a complex system all at once
in real time.' It is indispensable in such jobs as military fire control, and is much used'
in simulation. ,The IBM of the analog-com uter industry is Electronics Associates of
Long Branch, N.J., which last year earned about $2,200,000 on $29 million sales. S.M.
others I. the field are Beckman Iustrumentq, Veeder-Root, and Westinghouse."
T
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8 AUTOMATIC DATA PROCESSING EQUIPMENT
The advantage of the binary system is also that the "0" and the "1"
tie in neatly with the mechanical and electronic concepts around which
the computer and its satellite components are designed.
Various components make up an ADP system. The principal coin-
ponent of the digital computer is the processor or "main frame." The
processor contains complex electronic circuits which can accept and
process digital information. In simplest terms, each of these electric
circuits contains a switch. The switch may be closed or open, and
depending on the position, electric current flows or does not flow
through tie circuit. The position of the switch and the flow of cur-
rent correspond to the "0" and the "1" of the binary numbers system.
The processor or main frame accepts "input" information usually
fed into it from punched cards or magnetic tape components. On the
punched cards at predetermined locations there is either a hole through
which an electric contact can be made, or there is the absence of a hole
so no electric contact can be made. Similarly, on magnetic to e there
is either a magnetized spot or the absence of such a spot. On both
the card and the tape the presence or absence of a hole or magnetized
spot corresponds to the binary numbers system symbols, "0" and "1,"
and, therefore, the open or closed circuit described above.
The processing unit, having received the information, processes the
information according to the programed arrangement of the electronic
circuitry. This program of instructions, together with part of the
data to be processed, is stored in the computer system's memory com-
ponent. In the most. popular type of memory component, tiny ferro-
magnetic cores are used. These are either positively or negatively
magnetized, depending uu on the direction in which electricity passes
through them. As in the case of the other components described
above, these two conditions likewise correspond to the "0" and the "1"
in the binary numbers system.
One informational channel consisting of one series of these units-
that is, a single circuit, one memory core, or one position on a card or
tape--would-have practically no processing potential. But use of a
group of these informational channels, in parallel, rovides this poten-
tial. With the addition of every informational channel in the proc-
essor, a larger digital number can be handled. The combinations pos-
sible through the use of several parallel channels are sufficient to en-
code each of the letters of the alphabet. As a result, large numbers
and words can be fed into and processed in the computer. Further-
more, in a memory component, hundreds of thousands of cores can
be arranged to store and retrieve vast amounts of digital data or en-
code first letters, then words, and thereafter long progressions of
information.
After processing, the information obtained is transferred to an-
other computer unit, the "output" component, which may be a tape
unit, a card punch, a printer, or some type of visual display. if
necessary, this unit can translate the information from binary terms
into words, the decimal system, or some other usable form. Or, rather
than "reading out" its results, the digital computer can be a part of
a control system wherein information is fed into the processor on a
"real time" basis and the results almost instantly transferred to some
control mechanism.
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Certain digital. computer components are also used in conjunction
with special scientific elements of unique design for scientific studies
and investigations. Also, computers, or components thereof, may be
coupled with cryptologic devices in security or intelligence work.
ADP manufacturers mass produce the various components that
make up a computer system. ADP systems are "configured'" 4 (at-
tached by cables and essentially "pluggg'ed" together) by combining
the mass produced components previousl described necessary to meet
the requirements of a particular user. The task to be performed de-
termines the arrangement, number, and type of components that make
up a computer system. For economic and competitive reasons, only
the smallest systems are designed and manufactured as a single unit.
Since a system is made up of separate components, the customer is not
asked to pay for punched card, tape, memory, printer, or other com-
ponents or capacity not needed in his particular application.
Most, ADP components are general purpose in design. and can be.
used in a variety of applications. Most digital computer systems can
be programed to perform a wide variety of functions-administrative
and technical. That equipment designed to be used in these various
systems for the performance of different functions is known as " en-
eral purpose" equipment. About 90 percent of the computers in Gov-
ernment are general. purpose. The table on the following page has
been included as an indication of the varied applications of the general
purpose ADP systems of which the Government has 10 or more. Spe-
cially designed equipment for unique scientific and technical purposes
has been decreasing. Computer manufacturers constantly strive for
flexibility in the design of their components in order to give them as
broad a potential application as possible.
Under the concept of "general purpose" equipment, the combination
of mass produced components can be easily altered to perform any
task within the basic system's maximum capacity without rebuilding
the processor or internally modifying the individual component parts
even though the system may have been originally configured to per-
form one particular narrow function. If additional memory is needed
for a new application, additional memory components can usually be
added. If additional reading capacity is required, additional punched
card or tape units can be obtained. Similarly, unnecessary compo-
nents can be easily discarded.
SOFTWARE
Once a user has acquired an ADP system, complexities arise relat-
in to its use. ADP systems require complex instructions to operator
and machine. Operations must be charted in proper sequence and
the system set up or programed to perform the necessary functions
to achieve the desired result. To fulfill the needs of many users there
are also "canned" programs written for general application which
often require only minor revisions for any particular application.
The term "design" is sometimes used to denote what is real configuration. A com-
ponent is designed" by the manufacturer to operate in a certain manner. A system is
configured" by combining the components into an arrangement for a particular application.
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The ancillary techniques and aids needed for proper utilization of an
ADP system are commonly referred to as "software." In most in-
stances, manufacturers' sale and lease prices include software. The
costs attributable to software in the case of some ADP equipment
may exceed that of the "hardware" or, in other words, of the compo-
nents of the system.
There have been some 23 American ADP manufacturers, of which
about 20 are currently manufacturing equipment which has been
ordered. There are approximately 25,000 computers 5 of American
manufacture in use in the world and an estimated 10,000 additional
systems on order. International Business Machines (IBM), although
operating under a 1956 antitrust consent decree ' dominates the mar-
ket with about 75 percent of the business.7 UNIVAC Division of
Sperry Rand, Burroughs, Control Data Corp., RCA, Honeywell,
National Cash Register, and General Electric are other principal
suppliers. Other manufacturers include: Addressograph-Multigraph
Corp., Advanced Scientific Instruments, Autonetics, Bunker-Kano
Corp., Clary, Computer Control Co., Digital Equipment Corp., Friden,
ITT, Monroe Calculating Machine Co., Philco, Raytheon, and Scien-
tific Data Systems, Inc.,,
LEASING OF AD?' EQUIPMENT
Following a practice originally favored by ADP manufacturers in
the 1950's, a large percentage of ADP equipment is leased. Monthly
lease rates can be as low as several hundred dollars, but increase
sharply with the size of the system. Monthly rentals of from $25,000
to $75,000 are not uncommon. Some of the more complex, sophisticated
systems have monthly rentals of from $80,000 to $100,000. Purchasing
prices vary in a corresponding degree, beginning with as low as $25,000
and going as high as several million dollars for one system.a
ABP systems are designed to operate on a three shift per day, round-
the-clock basis. For most equipment used in Government one hundred
and seventy-six hours per month (8 hours a day times 22 working
days) is considered one shift. Although leasing agreements vary from
manufacturer to manufacturer, the user pays for this basic shift time
as well as for use of the equipment in excess thereof. In the last 2
to 3 years, while ADP lease and purchase prices have been otherwise
5 "Monthly Computer Census," Computers and Automation (April 1965), p. 50,
u U.S. V. IBM (Civil Action 72-344, So. Dist. N.Y.), final judgment entered Jan. 25, 1956;
subsequent order entered Jan. 14, 1903.
7 Fortune, op. cit., p. 113.
8 "Monthly Computer Census," op. cit. A
t t indr spear theymanufacturr rsnarecanow a aperIen iing e nsome cact o~npetitionnfromi SDP leasing
firms. According to Fortune magazie :
"They [the leasing companies] operate on the premise that a computer at the right price
has a longer economic life than is assumed in the manufacturer's rentals, which recover
mthe achines price of the discount machine In 45
rent them oto customers at rediced leasicompaies ng Ln gest buy tthe 118(,d
he field
seems to be Boothe Leasing Corp., a subsidiary of Greyhound Corp., whose most popular
inves provides dfrom its first customer with such raed al, but expects sultnot plan imately too finrecover Its
d another
home for the machine; and it offers various schemes that encourage the renter to use the
computer intensively. The rate for the first 3 years, for example, may provide little sav-
ings if the machine is used only one shift during the day. But it is cheaper. than the
manufacturers' rates for two shifts, still cheaper for three shifts. In any event, after
the third year the rent goes down steeply. Such plans, if popular, could upset the indus-
try's current price structure, which compels a company to pay just as much rent for a
0-year-old machine as for the same model brand-new" (Portune, op. cit., p. 207).
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12 AUTOMATIC DATA. PROCESSING EQUIPMENT
immune from normal competitive forces, there have been reductions
in extra-shift lease rates, and in some cases extra shift charges have
been eliminated.
The early. ADP systems of the 1950`s with thousands of electronic
vacuum tubes requiring extensive air conditioning capacity to keep
them at a satisfactory temperature level were large and cumbersome.
These vacuum tube systems are referred to as "first generation" equip-
ment. In the late 1950's, ADP entered the "second generation" when
small solid state transistors replaced the vacuum tubes which lessened
the need for vast air conditioning capacity to keep the equipment cool.
This led to 'unproved construction techniques which, coupled with ad-
vancing circuitry design and other improvements in the "state of the
art," resulted in equipment of increasing speed and capacity. Most of
the equipment now in use is "second generation."
The "third generation" is close at hand. As one leading ADP ex-
pert described this coming generation:
Huge new machines with fantastic memories and arith-
metical capabilities linked to numerous smaller satellite ma-
chines and serving literally dozens of users simultaneously,
are on the horizon at even lower cost.10
With the arrival of third generation ADP equipment, communica-
tions systems will link large, fast, high-capacity data processing sys-
tems to offices and laboratories of numerous users. These users, instead
of acquiring an ADP system or visiting an ADP service center, will
feed problems or information to be processed into the central computer
system over a communications system. The user would have installed
in his office or laboratory an input-output component no more
conspicuous than commonly used teletype units found in business of-
fices throughout the world. The user could either receive an im-
mediate response over this unit installed in his office or laboratory
or the information could be accumulated for periodic processing, re-
corded on tape or punched cards at the ADP center, or a printed
response could be prepared at the center and mailed or otherwise
delivered to him.
The technical and economic feasibility of this linkage of ADP with
communications has been proved. The ever-increasing complexities
of business and Government demand the fuller exploitation of ADP
potential in practically every field of human endeavor. The economics
of ADP design and manufacture make this third generation approach
inevitable. However, second generation, or even earlier equipment,
will not become obsolete overnight. Most equipment has an economic
useful life which extends far beyond the point of its technical obso-
lescence. In a narrow sense, at present almost any ADP system, by
)y~
the time it is off the drawing boards and in production, is technical
obsolete. A determination to change equipment for some more ad-
vanced system should be based on the need for larger and faster
capabilities. All ADP applications will not require the most ad-
vanced capabilities thereby justifying the additional expense-particu-
larly if tale costs of the older equipment have been fully amortized.
'n Robinson Dr. Herbert W., "The Outlook for the Automatic Data Processing Industry
and the Role of C.E.I.R., Inc.' Remarks before the New York Society of Security Analysts,
Nov. 10. 1964. See bearings on II.R. 4845, p. 210.
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%
AUTOMATIC DATA PROCESSIN
Thus, the advent of more advanced systems with greater speed and
capacity will not abruptly diminish the economic value op present
ADP. A gradual change, however, is inevitable.
Larger computers are more efficient per unit of work. They process
information faster and have larger processing capacities-but they
cost more. So, to obtain the efficiency inherent in these larger new
computers, they must be kept busy. As a result, fewer units of
Government (or business or industry) will have sufficient requirements
for processing capacity to justify sole utilization of individual systems.
The potentials of the larger computers now in the offing which can
be integrated with communications is so great that full utilization of
one system's maximum capability is sufficient to fit the needs of
scores of potential users. And, the use of the maximum potential of
a third generation system under conditions of optimum efficiency
can result in a phenomenal reduction in ADP costs to individual users.
This greater potential and lower cost cannot be ignored by either
business or Government.
As third generation time-sharing increases, the traditional agency-
by-agency structure of the Government in terms of ADP management,
will become less apparent and less important. Systems design will
depend more upon the functional requirements of the users than their
identity or jurisdiction. The need for Government-wide evaluations
as to acquisition and utilization of equipment will become so pro-
nounced as to make any narrower approach prohibitive. The waste
inherent in unused potential and errors in application or equipment
selection will be staggering.
B. CURRENT GOVERNMENT ADP MANAGEMENT TECHNIQUES
At this time, ADP has many varied applications in the Federal
Government. As classified by the Bureau of the Budget,;l present
applications fall into the following general categories : material, facili-
ties, financial, personnel, and natural resources management; opera-
tions; operations control and support; scientific; and engineering. For
the most part, the Government ADP listed in the nontechnical cate-
gories is used to perform cumbersome, routine administrative tasks
involving large volumes of data. Without considering any classified
applications in defense and security agencies, comparatively little Gov-
ernment ADP is part of advanced management systems directly in-
volved in the decisionmaking process.
During the 1950's, existing management policies applicable to cal-
culators, punched card, and other office equipment were extended to
ADP. BOB concern over ADP management was usually limited to
the annual agencywide budget review processes.
BOB policy responsibility for department and agency management
falls within two distinct though closely related areas. First, under the
Budget and Accounting Act of 1921, as amended,l- and the Budget
and Accounting Procedures Act of 1950, as amended,13 the BOB is
authorized to " * * assemble, correlate, revise, reduce, or increase the
requests for appropriations of the several departments or establish-
ments." In other words, the Bureau of the Budget maintains the
power of the "purse strings;" and, collaterally, has responsibilities to
'1964 Inventory of Automatic Data Processing (ADP) Equipment in the Federal Gov-
ernment, Bureau of the Budget, July 1964.
18 42 Stat. 20: 81 U.S.C. 1.
18 64 Stat. 832; 31 U.S.C. 1.
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i. AUTOMATIC DATA PROCESSr G EQUIPMENT
investigate, coordinate) and improve the management of the various
departments and agencies.
ADP MANAGEMENT STUDY BY BOB IN 19:,3
In 1958, BOB tool: note of the many specific problems inherent in
ADP management. Ill September of that year an "ADP Respon-
sibilities Study" was begun, to be completed in June the following year.
The findings and recommendations in this 1959 BOB ADP study.
portions of which are quoted throughout this report," constituted,I
realistic evaluation of what was wronwith Government ADP )man-
agement at that time and what had tot e done. The study recognized
the need for specialized management of ADP, for Government-w-ide
coordination, and the fundamental importance of accurate, up-to-date
information for all levels of management. "Dynamic leadership"'
in Government ADP management was foulid to be a "vital necessity."
And, as long ago as 1959, this BOB study concluded that "passive,
partial or informal types of leadership have had their place but have
now outworn their usefulness." 15
Unfortunately, the concept of "dynamic leadership" envisaged in
this early report never came about. To a significant degree, the
recommendations in this 1959 study were to be repeated in a sub-
sequent study BOB undertook almost 6 years later.3? The principal
14For the complete text of the "Report of Findings and Recommendations Resulting
from the Automatic Data Processing (ADP) Responsibilities Study, September 1958 to
June 1950 (conducted under the direction of the Bureau of the Budget)' see hearings on
H.R.4845, 567.
U 1959 BOB ADP study, p. 20.
"The 1959 BOB study contemplated that BOB would undertake the following:
"The Bureau of the Budget with the advice and assistance of agencies will as.ert broad.
general leadership and coordination of the ADP program in the executive branch. This
will Involve Government-wide responsibility for the following :
"(1) Using established lines of communication, existing organizational relationships and
Its membership on the Policy Committee for the Joint Accounting Improvement Program
and other such groups to insure effective Internal and Government-wide coordination of the
ADP program with related programs and activities.
(2) Formulating and promulgating policy, criteria, and planning guidance for the ADP
program of the Government.
"(3) Planning and coordinating the implementation of Government-wide ADP orienta-
tion and training.
(4) Establishing Government-wide formulas for costing ADP applications and review-
ing and analyzing summary cost data In terms of dollars and of manpower utilization.
"(5) Fostering, promoting, and coordinating the Interagency sharing of ADP equipment.
"(6) Developing specific plans for an experimental computer service center and, If
deemed feasible, taking action to assure the Creation and operation of the same.
"(7) Coordinating ADP research and development programs of the Government.
"(8) Providing leadership In a Government-wide effort to alleviate the problems of in-
comppatibility of ADP equipment.
"(9) Fostering and promoting-studies which will lead to minimizing the vulnerability of
ADP eeqquipment to sabotage, enemy attack. or natural disaster.
"(10i Operating a Government-wide ADP Information Exchange.
(11) Sponsoring the continuation of the Interagency Committee on ADP and assuring
its effective utilisation.
"(12) Reviewing and assessing progress of ADP programs In selected agencies and for
the Government as a whole.
"(13) Fostering and promoting desirable standardization In ADP systems which are
common to all agencies.
"(14) Using existing information sources and obtaining such additional summary infor-
mation as may be essential to the effective performance of the responsibilities assigned"
(1959 BOB ADP study, p. 4 : hearings on H_ R. 4845. p. 574).
The 1965 BOB stdy contained the following recommendations relative to the BOB:
CHAPTER 1
"in the development and application of policies, guidelines, and criteria, the Bureau of
the Budget will use a classification system which recognizes the essential differences among
computer installations. The pattern of classification suggested by the analysis made dur-
Ing this study will serve as the basis for developing this system."
CHAPTER 2
"I. The Bureau of the Budget will develop a broadly based program of continuous evalu-
ntion of computer systems, to provide an assessment of accomplishments and to serve as a
recurring source of Information for the development or revision of policies and guidelines.
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AUTOMATIC DATA PROCESSING EQUIPMENT J
reason why the management concepts in the 1959 BOB study were
not fully implemented was the need for legislation. The study recog-
The responsibility for conducting evaluations and preparing appropriate reports will rest
with the agency heads, in accordance with their normal management responsibilities.
"2. The Bureau of the Budget will develop criteria to assist in evaluating both Systems
design and various aspects of system performance."
CHAPTER 3
"1. The Bureau of the Budget will establish an interagency groupMftudy and develop
cost principles to be applied uniformly by agencies in establishing prlcci3 for shared com-
puter time and services.
"2. The Bureau of the Budget will continue Its evaluation of the service center concept
to determine a proper course of action to be taken.
"3. The Bureau of the Budget will, with the assistance of the major agencies concerned,
undertake a study of the problems associated with the use of contractor organizations for
providing services related to electronic data processing activities, with a view toward
developing policies, guidelines, or actions that the study may indicate are needed."
CHAPTER 4
"1. The Bureau of the Budget will provide for the publication of criteria, guidelines, or
regulations covering the selection of electronic data processing equipment. It will do this
through new issuances or by expanding upon current issuances, covering the following
subjects :
"a. The preparation of system specifications, including benchmark problems, to be fur-
nished equipment suppliers in requests for proposals.
"b. Evaluation of suppliers' proposals.
"c. Compatibility considerations.
"d. Consideration of excess and surplus equipment.
"e. Distinctions to be made between additions, replacements, and modifications when
selection policies and criteria are applied.
"f. Interagency sharing of experiences in the selection and performance of equipment."
CHAPTER 7
"1. The Bureau of the Budget will assume overall leadership of an executive branch pro-
gram use.~~In the fulfillment of this responsibility the Bureau nwilquipment and techniques for
is
"a. Establish standardization policies and objectives.
"b. Insure that the American Standards Association program for the development of
voluntary American standards for automatic data processing equipment and techniques
receives more adequate support by the Federal Government.
"c. Provide for appropriate Government use of American ADP standards approved by
the American Standards Association, when it is in the beat interests of the Government
and the Nation to take this action.
"d. Provide for the approval and implementation of Federal ADP standards in those
instances in which the needs of the Government would not be served by adoption of volun-
tary .lmerican standards approved by the American Standards Association, or interim
standards are needed pending adoption of an American standard."
"3. The Bureau of the Budget will assume overall leadership of a program for the
standardization of data elements in common use in the Government and the codes used to
represent those elements. In the fulfillment of this responsibility the Bureau will :
a. Invite agencies to submit information and recommendations concerning data ele-
ments In common use that should be considered for standardization.
It Assign responsibility for the studies necessary to establish the feasibility of stand-
ardization of data elements and codes.
"c. Make provision for the approval and implementation of standard data elements and
codes, the use of which Involves two or more agencies.
"d. Make provision for the revision of standard data elements and codes when circum-
stances justify this action."
CHAPTER 9
"1. The Bureau of the Budget will revise its current policies to provide that (a) estab-
lished criteria with rest>ect to the purchase or rental of automatic data processing equip-
ment shall be applied in determining costs to be reimbursed under cost-reimbursement
type contracts, and (b) agencies will include equipment operated by their cost-reimburse-
ment type contractors in antra-agency sharing arrangements.
"2. The Bureau of the Budget, in cooperation with the Department of Defense. National
Aeronautics and Space Administration, Atomic Energy Commission, General Services
Administration, and other agencies will undertake the development of reporting procedures
to obtain an inventory, together with related data on costs, of automatic data processing
equipment and services provided under cost-reimbursement type contracts. This informa-
tion should be incorporated in the ADP management information system recommended in
chapter 10."
CHAPTER 10
"The Bureau of the Budget will undertake the development of a broadly based ADP
management information system as a matter of high priority, and will seek the advice and
assistance of those agencies most vitally concerned, including agencies with Government-
wide responsibilities, such as the General Services Administration and the Civil Service
Commission."
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16 AUTOMATIC DATA PROCESSING EQUIPMENT
nixed, but did not emphasize, the possibility that legislation might
be necessary. Those making the study were perhaps unrealistically
optimistic in believing that a program of the magnitude they en-
visa ed involving all agencies of Government and billions in tax
funds could be brought about without statutory definition of the
"clear delineation of responsibilities and [the] organization plan" they
considered essential. The 1959 BOB ADP study was strong and
clear as to what had to be done, but relatively weak and ineffective as
to how to do It.
BOB MANAGEMENT GUIDELINES
BOB has issued ADP management "guidelines." In March 1960,
BOB issued Bulletin 60-6 entitled "Guidelines for Studies To Precede
the Acquisition of Automatic Data Processing Equipment." 17 These
guidelines generally conformed to the contents of a letter the Comp-
troller General had addressed to the various executive departments
and agencies in September 1957. This information concerning the
need for and the nature of ADP feasibility studies was undoubtedly
of value to the various a ncies. But Bulletin 60-6 made it clear
that the guidelines were advisory and that. there was no requirement
that agencies contemplating the acquisition of ADP follow this rec-
ommended evaluation procedure.
Some 18 months later, in October 1961, the BOB issued Circular
A-54 outlining "Policies on Selection and Acquisition of Automatic
Data Processing (ADP) Equipment." 18 The principal factors dis-
cussed in this circular were:
1. The desirability of selecting on the basis of exact system
speci ficat ions.
2. That equal opportunity and appropriate consideration
should he afforded all manufacturers who offer equipment capable
of meeting systems specifications.
3. That two primary factors should be considered in the selec-
tion of equipment: (a) its capability to fulfill system specifica-
tions, and (b) its overall costs.
4. The need for effective lease versus purchase evaluations.
On March 14, 1962, the BOB directed agencies to furnish annual
reports on their ADP inventories as well as limited information as to
ADP utilization. In August 1963, BOB published Circular A-61,
essentially a more comprehensive statement of the Bureau's ADP
management guidelines and consisting substantially of the earlier
guidelines referred to above.1e
Subsequently, BOB has issued other circulars relating to ADP con-
cerning matters other than management policy-the establishment of
an experimental sharing exchange and computer service center (Bul-
letin 64-9, Jan. 2, 196,40 and an ADP sharing program (Circular
A-27, June 15, 1964) under the responsibility of the Administrator
of General Services.21
Also, in February 1965, the BOB submitted a "Report to the Presi-
dent on the Management of Automatic Data Processing in the Federal
17 All BOB rirculars, bulletins. and other directives relating to ADP are set forth in
app. B of the hearings on II.B. 4845, p. 270.
"Ibid., p. 288.
v Ibid.. p. 292.
.Ibid., p. 847.
is Ibid., p. 350.
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Government," 22 surveying some of the more serious ADP manage-
ment problems and containing a series of recommendations to deal
with them. On March 6, 1965, BOB issued Circular A-71 implement-
ing these recommendations and delineating the responsibilities for
ADP management as between the BOB, the GSA, and the National
Bureau of Standards.23
INEFFECTIVENESS OF GUIDELINES
Since 1958, up to the time of the hearings on H.R. 4845, the GAO
had issued approximately 100 audit reports to agencies, congressional
committees, and to Conoress revealing serious shortcomings in the
manner in which speciRe agencies acquired and/or utilized ADP
equipment 24 The major deficiencies cited in these reports have been:
(a) Inadequate feasibility studies.
(b) Uneconomical and ineffective equipment utilization.
(c) Overpayments resulting from inadequate management
practices.
(d) Uneconomical procurement of equipment.
Excludin the 29 reports dealing with inefficiencies in the manner
in which APP equipment has been acquired by certain Government
contractors, most of the deficiencies outlined in this series of reports
constituted violations of BOB guidelines, or otherwise demonstrated
the need for a more effective management system based upon a broader
Government-wide coordinated approach. These reports, aimed spe-
cifically at the independent operations of individual user agencies,
have demonstrated that guidelines of an advisory nature and without
provisions for effective review or "feedback" of information as to
agencies' compliance or the need for policy changes do not meet the
Government's ADP management needs.
C. THE NEED FOR GOVERNMENT-WIDE COORDINATION IN ADP
MANAGEMENT
COORDINATION FUNDAMENTAL TO GOOD MANAGEMENT
There are countless examples of the benefits of coordination in
business and Government. In recent years, for example, the Secretary
of Defense has achieved significant improvements in operations and
large savings in tax funds by consolidating the management of defense
logistics and other defense support functions. On January 29, 1962,
in hearings before the House Subcommittee on Defense Appropria-
tions, Secretary McNamara said :
One of the most productive fields for the economic appli-
cation of centralized management is in the provision of
common supplies and related services to all the military
departments.
After a rather comprehensive study of this entire problem,
we came to the conclusion that considerable economy and effi-
22 "Report to the President on the Management of Automatic Data Processing in the
Federal Government," prepared by the Bureau of the Budget (March 1965) : this report
has been printed as S. Doe. 15, 89th Cong., 1st less. ; subsequent page references in this
report will be to the Senate document.
28 Hearings on H.R. 4845, p. 353.
24 In app. B of the hearings on H.R. 4845 is a summary of the most significant of these
reports.
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ciency could be gained, if all common supply management
activities were consolidated in a single agency.25
This philosophy has been applied to a number of functions in the
Defense Department, including intelligence, communications, and,
under the Defense Supply Agency, the coordination among the serv-
ices of approximately $3 billion of industrial-type production equip-
ment which the Government owns and furnishes defense contractors
for use in Government work.
On March 28, 1963, in hearings before the Joint Economic Commit-
tee, the Secretary pointed out that the concept of consolidated man-
agement need not be limited to the Defense Department:
The basic principle that there should be a single agency to
procure and manage common items of supply or services for
all users is as this committee has repeatedly pointed out, as
valid for tie Government as a whole as it is for the Depart-
ment of Defense. Therefore, in our own efforts to obtain
greater efficiency through the consolidation of common logis-
tics support activities, we should not restrict ourselves to
Defense agencies alone. Whenever we find that it is more
economical to use the capabilities or facilities of other Gov-
ernment agencies, with no loss in military effectiveness, and
at the same or less cost, we should not and have not hesitated
to do so."
General purpose ADP is a "common item" throughout the Federal
Goverment. While the coordinated Government-wide management
system provided in H.R. 4845 may not provide the same degree of
centralized management of ADI' as the Secretary has applied in the
various defense support areas referred to above, the same principles
apply. For this reason, there is no legitimate reason why the Govern-
ment should not obtain the benefits inherent in a Government-wide
coordinated approach to ADP management..
GOVERN-NIEXT-WIDE COODINATIOiti RECOMMENDED BY GAO IN 1955
Concern over our present disjointed agency-b' y-agency approach to
ADP management is no recent development.. On .June 27, 1958, the
Comptroller General issued the first of four comprehensive Govern-
ment-wide ADP mana meat reports. 27 This early report outlined
the tremendous potential of ADP but stressed concern over certain
trends in ADP acquisition and use which he believed would inevitably
lead to costly inefficiencies. Concern was expressed over the practice
of substituting ADP for less sophisticated equipment rather than inte-
grating ADP into agency procedures and functions on a systematic
basis. But, most important., this report pointed out that there was
no single agency of the Government responsible for directing and
coordinating continuing developments in this field. Accordingly, the
report stressed as a principal recommendation the need to establish an
effective coordinated ADP program of joint effort by the various user
agencies in Government.
's Testimony of Secretary of Defense McNamara, House Subcommittee on Defense Appro-
priations, Jan. 29, 1962, p. 158 ; reprinted in hearings on H.R. 4845, p. 205.
M Statement of Secretary of Defense McNamara, hearingg before the Joint Economic
Committee, Mar. 28, 1983. p. 20 ? reprinted in hearings on H.R. 4845, p. 200.
"Summary of Progress and lirend of Development and Use of Automatic Data Processing
in Business and Management Control Systems of the Federal Government as of December
1957," Comptroller General of the United States (June 1958); GAO file No. B-115369.
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COMPTROLLER GENERAL RECOM31ENDATIONS IN 1960 AND 1963
On December 30, 1960, the GAO issued a second Government-wide
audit report.28 Aside from urging greater ADP utilization in certain
defense functions readily adaptabre to ADP, this report again empha-
sized the need for Government-wide coordination in ADP manage-
ment. The report endorsed the 1959 BOB ADP study but again
called attention to the lack of positive central planning of a long-range
nature within the executive branch to promote the maximum degree
of efficiency, economy, and effectiveness in. ADP use.
On March 6, 1963, a third Government-wide audit report was is-
sued .211 In this report, the GAO demonstrated that very substantial
sums could be saved if the Federal Government purchased a larger
percentage of its ADP equipment. The report contained detailed lease
versus purchase cost comparisons of 16 different widely used ADP
systems. Applying these comparisons to 523 of the approximately
1,000 systems then installed or on order as of June 30, 1963, the GAO
estimated potential savings of about $148 million over a 5-year period
with savings of appproximately $100 million a year thereafter through
the selective purchase of certain of the components of certain systems.
In this report, the GAO, cognizant of the extent BOB had been
able to implement the recommendations contained in the 1959 BOB
ADP study, stressed that, "We are aware of no significant progress
toward an effective coordinating mechanism in the Federal Govern-
ment for achieving the interrelated objectives cited"; 30 that is, efficient,
businesslike, Government-wide coordinated APP management. The
report warned that, to -fully realize savings of this magnitude, that
a basic change from an agency-by-agency approach to a Government-
wide coordinated management system must be made. As an example,
decisions as to the advantages of lease versus purchase should be
made from the standpoint of the Government as a whole, and not
primarily from the standpoint of the potential use of the system to
the initial using agency. The report also indicated the low ebb in
Government ADP utilization. ADP systems are designed (tech-
nically and economically) to operate three shifts a day but at that
time average Federal usage was little more than one shift a day.
The report concluded by reasserting the recommendation of some 5
years' standing that there be Government-wide coordination in ADP
management.
On April 30, 1964, the fourth and most recent comprehensive
Government-wide ADP report was submitted to Congress.3' This
report updated Government management developments for the year
following the issuance of the March 1963 report discussed above. The
GAO noted limited improvements but warned that o timum efficiency
and effectiveness would not be achieved without (government-wide
coordination. During this period, this committee had recommended
21 "Review of Automatic Data Processing Developments in the Federal Government." by
the Comptroller General of the United States (December 1960), GAO file No. B-116369.
29 "Study of Financial .Advantages of Purchasing Over Leasing of Electronic Data
Processing Equipment in the Federal Government," by the Comptroller General of the
United States (March 1963), GAO Me No. B-116369.
so Ibid., p. 38.
m "Review of Problems Relating to Management and Administration of Electronic Data
Processing Systems in the Federal Government," by the Comptroller General of the United
States (April 1964), GAO file No. B-115369.
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and the House had approved II.R. 5171,12 the forerunner of this leg-
islation, to provide for coordination in Government ADP management.
Although this legislation was not acted upon by the Senate, there was
a significant reaction to the bill in the executive branch of the Govern-
ment. And in the April 1964 report the Comptroller General was
able to point to limited improvements in certain aspects of Govern-
ment APP management. But he cautioned that the advances that
were possible under the present agency-by-agency approach were
limited, and again lie emphasized the need for Government-wida
coordination and warned that in the absence of a Government-wide
approach to ADP management, an optimum degree of efficiency and
economy could not be achieved.
D. EFFECTIVE GoveRNMENT-w1DE MANAGEMENT or ADP PROVIDt'r
nv II.R. 4845
RESPONSIBILITIES OF BOB, GSA, AND TUE DEPARTMENT OF COMMERCE
To achieve a businesslike Government: wide coordinated manage-
ment effort, it is necessary that additional authority be given to BOB,
GSA, and the Department of Commerce. In the 1959 BOB study, the
future course of Government ADP management was discussed as
follows :
At this point in time [1959] we in the Government have
entered that stage of the ADP era which may be classified as
sober reflection. We have now isolated and identified the
major problems which need attention, as succeeding sections
of this report will demonstrate. There are some unanswered
questions as to exactly where we stand in a Goveriunent-wide
sense, but we soon will find the needed answers. We are not
exactly sure as to what the future holds, but we soon will have
mapped a desirable course to follow. For these things we
need a clear delineation of responsibilities and an organiza-
tion plan .-13
The hopes expressed in the BOB's 1959 ADP study have not been
fulfilled, and it is evident that Congress must provide a clearer de-
lineation of responsibilities and a more definite organizational plan if
the Goverment is to have maximum efficiency in ADP management.
Again, as in 1959, the Government is about to enter into a more sophis-
ticated stage of ADP usage. With third generation equipment and
ensuing developments will come broader ADP utilization and vastly
increased Federal ADP expenditures. Thus, aside from the current
problems, more effective techniques must be devised for the manage-
ment of ADP equipment if in the future we are to avoid even more
costly errors which otherwise will accompany Government ADP usage
into this newer generation.
Although H.R. 4845 provides for fundamental changes in Govern-
ment ADP management., the bill in many respects is very limited in
scope.. In essence, the bill would improve the operational macliineiy
available to the Government making it possible for those agencies
which currently have ADP management responsibilities to do a better
job. In many respects, this legislation provides the delineation of
U. Sept. 428. 88th Con g. lot sere., approved House of onprese 4845tives, July 6u 18. 1963.
1969 Bureau of the Budget ADP stu y, p.
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AUTOMATIC DATA PROCESSING EQUIPMENT
responsibilities and stronger organizational plan for Government ADP
management that was the goal of the BOB in 1959. The 1959 BOB
study states :
To a large degree, the recommended program for the
Bureau of the Budget is really nothing but a plan by which
the Bureau may begin to perform more adequately than it has,
the responsibilities already clearly assigned to, it.' [Emphasis
by BOB.]34
While H.R. 4845 is not primarily concerned with determining
policies, by providing the means with which adequate information
can be obtained, joint effort efficiently applied, and new man-
agement techniques devised, this legislation makes it possible to deter-
mine effective policies and achieve fiscal control. Under II.R. 4845,
"fiscal and policy" control over ADP management remains in the
BOB. Thus, the bill does not violate or compromise the traditional
policymaking and fiscal control functions of this staff office of the
President. Any action of any agency, under authority of this legis-
lation, would be subject either to approval or review at BOB.
Also, BOB would not be delegated any operational responsibilities
of the ADP management program. As time passes, countless impor-
tant Government management problems must be dealt with at the
BOB level. The assumption of operational responsibilities incident to
the solution of these problems could hamper BOB's ability to fulfill
its primary mission as a staff office of the President dealing with
policy and fiscal matters.
GENERAL OPERATIONAL RESPONSIBILITY IN GSA
H.R. 4845 extends to the Administrator of General Services the
primary operational responsibility for coordinating Government ADP
management subject to BOB policy and fiscal control. This delega-
tion, as in the case of the BOB, is in line with the traditional delega-
tion of authority to GSA. H.R. 4845 is an amendment to the basic
statute which created this Government-wide service organization.
This delegation would augment specific ADP management functions,
such as ADP procurement, presently within, the scope of GSA
responsibilities.
To carry out this function, GSA is authorized and directed to co-
ordinate ADP management and to administer an ADP "revolving
fund." This fund, used in conjunction with the coordinating author-
ity, would afford an effective means of (a) providing the Government
with more adequate management information, (b) achieving optimum
utilization, and (c) attaining economic acquisition of Government
ADP equipment.
Through the use of the revolving fund, GSA would acquire by lease
or purchase the ADP needed to fulfill requirements of the agencies.
Agencies would obtain annual appropriations from Congress neces-
sary to reimburse the revolving fund. Although the Comptroller
General normally does not approve of revolving Funds, lie specifically
endorses the use of such a funding arrangement in this instance.
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22 AUTOMATIC DATA PROCESSING EQUIPMENT
In addition to the fiscal and policy control of the BOB, the bill
expressly, limits GSA's authority. Agencies would maintain their
present Independence in the determination of ADP requirements.
Agencies would be free from any interference from GSA as to the
manner in which ADP equipment is used. They would be advised of
all significant decisions affecting their ADP operations and would.
have the right to appeal to BOB. The bill limits GSA's authority to
'`operate" ADP (other than its own in-house equipment} under this
,management ljrogrann to those instances where multiple agency usage
of equipment is involved.
TECHNICAL SUPPORT OF TIIE NATIONAL BUREAU' OF STANDARDS
The technical aspects of this coordinated management program re-
Inain with the National Bureau of Standards in the Department of
Commerce. Again, this delegation is in accordance with the traditional
responsibilities of the agency. The Bureau of Standards has done
considerable ADP research in the past and has made many contribu-
tions to the "state of the art.." The Bureau of Standards would offer
technical support to the BOB and GSA and would also act in an ad-
visory capacity to the various agencies and other users when requested.
Aside from these routine responsibilities the Bureau of Standards
would undertake whatever research and Aevelopment is necessary to
the interests of the Government, supplementing similar efforts under-
way in various user agencies.
Among the morn serious problems confronting the Government in
ADP utilization is the Iack of compatibility in equipment. Standard-
ization has been a problem in Government- almost from the time this
equipment. was Introduced. For the past several years, various user
agencies, the Bureau of the Budget, and this and ether committees
have been concerned over the lack of compatibility in equipment which
has seriously compromised the Government's overall ADP potential.
This problem was discussed in an earlier report of this committee in
1963 85 in conjunction with the activities of the Bureau of Standards.
At that time, it was recognized that, to a large de , progress in the
standardization of equipment must come from ADP manufacturers.
The manufacturers have the technical know-how to evaluate the alter-
natives and they would design and build the equipment.
It has also been r ized, however, that the Government's domi-
nant role as the worldrgest ADP user requires that there be a con-
tinuous source of Government interest and concern in the achievement
of greater standardization. Under II.R. 4845, the National Bureau of
Standards is expressly extended the responsibility for representing the
Government in this standardization effort and submitting to the Presi-
dent any recommendations for further Government action as may be
neces
It s of the intent of this legislation to authorize the Bureau to
structure a broad research and development program without regard
to the work of the various other agencies or in a futile effort to over-
take the research and development capacity of the industry The
authority in this legislation is aimed at supplementing the Govern-
ment research effort in coordination with other Federal agencies and
monitoring developments in the industry for the specific purposes
provided in the legislation.
0 H. Refit. 450, 88th CoDg.. in eeae. (1968).
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AUTOMATIC DATA PROCESSING EQUIPMENT 23
E. HOW THE AUTHORITY DELEGATED IN H.R. 4845 WOULD BE USED
To IMPROVE GOVERNMENT ADP MANAGEMENT
H.R. 4845 is aimed primarily at filling three vital management needs
at this time. These are (1) more adequate management information,
(2) optimum utilization through sharing and multiple use. and (3)
economic acquisition. Realization of an economical ADP acquisition
program, in turn, involves three principal factors :
(a) Improving the Government's bargaining position through
volume acquisitions;
(b) Basing lease versus purchase evaluations, whenever pos-
sible, on the long-term value of the equipment to the Government
as a whole; and
(c) Selecting that equipment for purchase which, on a Govern-
ment-wide basis, offers the largest purchase advantage.
Timely, pertinent, accurate information is indispensable to the man-
agement 'concept. In a sense, management consists of the collection
and assimilation of data needed to predict as many imponderables as
possible so as to afford the manager as many options or alternatives as
a particular problem or circumstance permits. Sound decisiomnaking
is synonymous with good management and is inseparable from the
quality of the information on which the decisions are based. Informa-
tion thus minimizes the guesswork in decisionmaking and creates the
opportunity for more effective and efficient management.
A basic problem in Government ADP management up to this time
has been the lack of accurate management information. BOB, the
executive agency having overall management policy responsibilities
for ADP, has not had the information needed to properly coordinate
and oversee the Government's ADP affairs. In the 1959 ADP manage-
ment study, BOB recognized the need for adequate management in-
formation. The report contained a finding that :
No provision has been made to assemble Government-wide
factual data on ADP utilization in the executive branch on a
recurring basis.
Recent studies of ADP utilization, or certain of its aspects,
have highlighted the continuous need for selected current fac-
tual data on a Government-wide basis in the ADP program.
The responsibility for leadership, coordination, or review of
ADP utilization at the agency level, or on a Government-wide
basis, can be discharged adequately only if certain essential infor-
mation is continuously availa,ble.36
Following this finding, the 1959 report recommended that provi-
sions be made for the supply of adequate information needed for ADP
management. Unfortunately, this recommendation was never fully
implemented. On March 14, 1962, BOB directed agencies to furnish
annual ADP inventory reports which also contained limited informa-
tion on ADP utilization and whether the equipment was leased or pur-
chased. Additional information was requested as of November 1963,
but this was for use in the preparation of the 1965 BOB ADP study.
As Circular A-55 pointed out :
" 1959 Bureau of the Budget ADP study, p. 12; hearings on H.R. 4845, p. 582.
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24 AUTOMATIC DATA PROCESSING EQUIPMENT
Some of the changes, particularly those that require new
and additional information, have been instituted to provide
information for use in a special study of ADP policies and
practices recently directed by the President, and therefore will
not necessarily be continued in future years.31
Reporting on an annual basis was continued, which means that the
Government has never had up-to-date inventory information. Nor
has there been any systematic consolidation of fiscal data. Most Gov-
ernment-wide fiscal data is in the form of estimates, some of which are
highly speculative. AI)P appropriations are scattered throughout
the Federal budget.
Whatever BOB has done or has been able to do has been woefully
inadequate compared to the need. Annual printed inventories con-
taining meager information, months out of date, unaccompanied by
any comprehensive, accurate fiscal data as to investment, expendi-
tures, or costs, are wholly inadequate for ADP management purposes.
It is ironic that ADP with such potential for data control has not
been used extensively in ADP management.. Certainly a basic re-
quirement for any efective Government ADP management program
is the constant availability of comprehensive, accurate, up-to-date
inventories and fiscal information as to Government equipment as
well as prospective requirements.
This information is needed for a number of purposes. First, the
President and the Congress require overall inventory and fiscal data
to maintain policy and budgetary control over ADP expenditures.
Furthermore, those Federal officials with policymaking, fiscal, or op-
erational responsibilities for ADP require this information to do their
jobs. As the 1959 BOB study suggested:
* * * if there is to be objective leadership and coordina-
tion of the ADP program of the Government, the leaders and
coordinators must be informed."
As discussed above, BOB has in the past relied upon policy guide-
lines which have been permissive and subject to agency avoidance
without notice or explanation. Even if lack of compliance with exist-
ing policy is wholly justifiable in isolated instances, those with policy
enforcement responsibilities must be kept informed. They must have
soma form of informational "feedback" to keep them advised of what
moingg on. Otherwise, their polieymaking activity has little impact.
cials with coordinating authority also require all the reliable,
pertinent, up-to-date information they can get to take advantage of
the options or alternatives this information reveals to them to increase
the utilization or provide for the more economical acquisition of
equipment.
H.R. 4845 would provide the means by which readily available,
recurring data essential to effective management could be collected
and mace available to those officials in the Government requiring it.
Under this legislation, GSA would establish a comprehensive inven-
tory to maintain carefully selected data needed for Government ADP
management. Use of ADP would make it possible for such infor-
mation to be available on a continuing basis. Collateral. to the inven-
tory would be the information stemming from the operations of the
n Bureau of the Budget Circular No. A-55, revised, Nov. 15, 1903; hearings on H.R.
4845.e6 910.
. 19 Bureau of the Budget ADP study. op. cit., p. 18.
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revolving fund which would afford the necessary flow of up-to-date,
accurate, detailed information on investment, disbursements, and costs.
It is contemplated that this information, particularly at it relates
to prospective agency ADP requirements, would be made generall
available to ADP manufacturers upon request. Extending to all
manufacturers the most advanced information available on prospec-
tive Government ADP requirements would permit more extended
periods of time in which the manufacturers could evaluate Govern-
ment specifications and refine the proposals they submit. General
availability of information on prospective Government requirements
should provide for fairer competition among all the various ADP
manufacturers, some of whom at this time it is suspected do not "get
the word" on some Government procurements until it is too late to
submit an effective proposal. Under this approach, all manufacturers
would have a better opportunity to compete for Government business
purely on the basis of quality and cost. The result should be increased
competition to the benefit of the Government.
OPTIMUM UTILIZATION OF ADP THROUGH SHARING AND SERVICE CENTERS
UNDER H.R. 4845
Under H.R. 4845, GSA could provide optimum Government ADP
utilization by improving the sharing program and establishing multi-
agency ADP service centers. ADP is designed to operate three shifts
a day. But Government utilization falls far below any optimum level
of utilization. The BOB inventory report of August 1,962 showed
extremely low utilization throughout the Government. The average
was only 267 hours out of a possible 720 hours per month. Only 24
percent of the total installed equipment was reported as being oper-
ated the equivalent of two shifts a day. The BOB inventory of July
1964 indicated that approximately 38 percent of Government ADP
was being operated as much as two shifts. While these figures indi-
cate an improvement, there is widespread waste in available but un-
used Government ADP equipment time. The problem of maintaining
optimum utilization will become more difficult as newer ADP sys-
terns with greater speeds and capacity are introduced into Government
use.
The BOB 1965 ADP management study reports a total of some
500,000 hours of unused Government ADP capacity at this time.
About 170,000 hours of this total is characterized as available for
sharing. The remaining 330,000 is considered unused but unavailable
for a number of reasons put forward by the various agencies. The
BOB study did not substantiate the reasons given. There are many
justifiable reasons for disqualifying individual ADP systems for shar-
ing that must be respected. But this estimate of available ADP
capacity may well be subject to upward revision if some of the reasons
given by agencies to avoid sharing were routinely subjected to closer
inspection and review.
Aside from utilizing otherwise avail able but unused ADP capacity,
sharing has other advantages. It makes the use of larger computers
with lower unit costs feasible. The introduction of the third gen-
eration ADP equipment alone would justify the coordinated approach
in the use of Government ADP as provided in this legislation. There
is also another significant advantage in sharing. It will increase the
tendency of the various agencies to work together more closely in
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solving mutual problems in the "software" area. The waste that
prevails in the duplication of effort in solving "software" problems
which have a common applicability to many agencies are as serious
as the wastes in "hardware."
On June 15, 1964 BOB in Circular A-27, set up an ADP sharing
program under GS'tA.'o There is general agreement: however, that
this legislation would substantially improve the effectiveness and effi-
ciency of GSA's efforts. Essentially, sharing is an interagency co-
ordinating effort. As the 1959 BOB study pointed out, sharing
"requires centralized coordinative-type leadership if it is to reach a
level consistent with effective and economical utilization of equip-
ment.." 40 II.R. 4845 would substantially improve the present Govern-
ment ADP sharing efforts in a number of res ects. First, the infor-
mation generated by the ADP inventory would allow GSA to consider
systematically the possible combinations in matching unused capacity
with prospective requirements. Second, the cost data developed
through use of the revolving fund and the inventory system would
furnish GSA with reliable information needed to prorate costs between
agencies and otherwise to determine user charges. Third, the revolv-
ing fund offers a simple and effective means for reimbusing and
charging the various agencies involved in sharing arrangements since
all payments would be to or from the fund. Fourth, when feasible,
GSA could establish (and operate, if necessary) multiagency service
centers to furnish ADP capacity to various agencies and other users.
Such service centers would bring the use of ADP within the economi-
cal reach of smaller agencies and Government offices. There may be
no single user in the area with sufficient requirements to justify acqui-
sition of the most efficient system needed but, acting together, several
users could benefit from the economies inherent in a larger, faster
computer.
The Government is the largest ADP user in the world. Through
lease and purchase contracts billions in tax funds are invested an-
nually. Yet, as the 1965 BoB stud points out, "The Government
obtains no special advantages as a volume purchaser of equipment." 41
The smallest company, with the most limited ADP requirements, can
acquire the various commercial general purpose ADP systems at prices
comparable to those paid by the Government. Though volume acqui-
sitions should inherently place the Government in a stronger bargain-
ing position and lead to volume discounts, as a matter of practice
tinder the present disjointed agency-by-agency system of Government
ADP management, the Government has hardly any bargaining posi-
tion at all.
Over the years agencies have acquired commercial, general purpose
ADP at prices listed on GSA supply schedules. As in the case of
many other supplies the Government requires, GSA enters into neao-
tiet;ons with various ADP manufacturers and agrees upon prices
mHearings on H.R. 4845. p. 850.
1959 Bureau of the Budget ADP study, op. cit., p. 29; bearings on H.R. 4845, p. 599.
" 1905 BOB ADP study; p. 41.
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for the equipment they have to offer to be applied to Government leases
and purchases during the coming fiscal year. Upon completion of
these negotiations, price schedules for the different manufacturers
are distributed to the various agencies and, generally, the equipment
they need is acquired at the prices listed on the schedules. Manufac-
turers have occasionally offered an agency lower prices on particular
procurements than are listed on the GSA schedules. In these in-
stances, the manufacturer files an amendment to his GSA schedule
price and the lower price is applicable to all Government acquisitions
of that equipment for the remainder of the fiscal year. GSA has been
able to obtain some concessions from manufacturers on lease prices
and conditions, particularly second and third shift use rates. Other-
wise, the GSA schedules generally reflect the manufacturers' list prices.
Under this procedure, price determination and procurement are di-
vorced. The various manufacturers have no guarantee that the Gov-
ernment will lease or purchase any particular volume of their equip-
ment. As a result, some manufacturers' representatives characterize
the GSA price schedule as simply a "hunting license." Agreement
to a schedule of prices with GSA permits them to embark upon the
more formidable task of hunting for agencies in the Government
desirous of leasing or purchasing their equipment. Under these
circumstances, it is somewhat understandable why manufacturers have
generally responded with a remarkable degree of disinterest in price
cutting in GSA contract price schedule negotiations.
GSA, with no alternate course of action, has been forced to extend
price negotiations in many instances well. beyond the beginning of the
fiscal year to which the schedules apply in an effort to obtain better
terms and conditions. These delays in themselves have caused admin-
istrative problems.
To obtain volume discounts, the Government must have volume pro-
curement. The "open end" supply contract simply is not the most
suitable arrangement for ADP procurement. The basic problem is
that this form of contract procedure does not afford the Government
any advantage corresponding to the volume of equipment leased or
purchased. A specialized approach to Government ADP procurement
is needed. As the 1959 BOB study suggests :
It is most unusual to promulgate Government. wide policies
on specific equipments. However, as the General Accounting
Office has already recognized, the use of ADP equipment has
now demonstrated that its impact is such as to warrent spe-
cialized attention.42
The 1965 BOB study recognizes this problem but offers an inade-
quate solution. Under the BOB approach? - negotiation deadlines
would be established and manufacturers failing to agree to terms
would be precluded from Government procurement activities. Al-
though the 1965 BOB study offers this deadline concept as a principal
solution, the study also recognizes its limitations. As an example, in
the report it is stated :
On both sides, maneuverability is curtailed if an impasse
[in negotiations] is reached. The Government is faced with
42 1959 BOB ADP study, p. 21 ; hearings on H.R. 4845, p. 591.
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the possibility that the contractor may remove rented equip-
ment from the premises if a contract is not executed by July 1
(although realistically he would probably not resort to such
drastic action in view of the financial impact). The manu-
facturer, on the other hand, is faced with the possibility that
the Government may release the rented equipment on July 1
(although realistically it could not do this in view of the ex-
tensive work and cost involved in changing to another manu-
facturer's equipment.). Consequently, both parties must pro-
ceed toward a final agreement, despite the length of time
involved."
This "deadline" approach unrealistically assumes that the agencies
can arbitrarily be deprived of the equipment of a particular manu-
facturer even though it may be needed in critical government pro-
grams. But, fundamentally, the problem is that the deadline ap-
proach applies with equal force to both the Government and the manu-
acturers. The Government's relative position is not improved by the
application of a deadline to negotiations. There must be a relative
improvement in the Government's position as contrasted to that of
the manufacturer. And, to demand volume discounts, the Govern-
ment must in fact procure ADP in volume rather than on a piecemeal
agency-by-agency basis.
The traditionally accepted solution to this type of problem has been
the "single purchaser" concept. Were all APP purchase and lease
money in "one pocket," the Government would be in a stronger bar-
gaining position in dealing with manufacturers. The purchase or
lease of equipment and the price to be paid would be part of the same
negotiation. Whenever feasible, the Government could "raise the
stakes" by coordinating the acquisition of as much equipment of one
particular manufacturer at one time as possible. Furthermore, when-
ever alternative systems of different manufacture would be equally
acceptable in satisfying agency requirements, teams of Government
negotiators, made up of GSA officials and procurement, specialists from
the agencies involved, could pit one manufacturer against another
until competitive prices were obtained.
ACQUISITION OF GENERAL PURPOSE COMPONENTS OF UNIQUE SYSTEMS
UNDER A VOLUME PROCUREMENT PROGRAM
The mass-produced, commercially available, general purpose com-
ponents of "unique," "tailor made," specially designed," ADP sys-
tems can be effectively acquired under a volume procurement. program.
Arguments against sole source procurement and the possibility of the
Government's obtaining price concessions incident to volume acquisi-
tions center upon the proposition that each ADP system in unique,
"tailor made,' and designed for one particular application. As the
1965 BOB study discussed the matter:
When the possibility of discounts has been discussed, manu-
facturers have indicated that discounts from list prices can-
not be made solely on the basis of the number of units sold.
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AUTOMATIC DATA PROCESSING EQUIPMENT 29
The reason is that the price covers more than just the equip-
ment itself ; it includes the provision of all supporting serv-
ices, such as computer programs, compilers, special-purpose
routines, and specialized training and systems aids-all of
which vary and tend to be custom-tailored for each installa-
tion. Because of these variances, the costs incurred by the
manufacturer to support each installation are substantially
the same and are not reduced by virtue of many installations. 44
These "custom-tailored" items referred to by BOB relate to "soft-
ware" and not the mass-produced, general purpose "hardware" com-
ponents making up these specially designed ADP systems. As pointed
out earlier in this report, these mass-produced components can be ar-
ranged in varying combinations to meet the particular application of
the user. Inherently, all commercially available, general purpose
ADP systems except those of the most unique application have a basic
capability which can be applied to many uses in agencies throughout
the Government. And, even when a system has been designed to meet
a particular narrow application, additional components can be easily
added to broaden its use. Changes of this kind are considered routine.
Under this legislation, GSA is not charged with either the selection
or the use of equipment. The agencies would determine their indi-
vidual. requirements and use the equipment as they see fit. GSA would
be furnished a shopping list of commercially available general purpose
ADP system components. Once other aspects of this coordinating
system have been fully implemented so that adequate information is
available, GSA could coordinate ADP acquisition and schedule as
large a volume of acquisitions as agency requirements permit. To the
agency, the system may be complex, specially designed and tailor made
to fill some particular application critical to its operations. But, to
GSA, as far as hardware procurement is concerned, these complex,
highly specialized systems would only be a list of mass-produced, com-
mercially available general purpose components.
Although software procurement would present a more complex
problem, there is no reason that these complexities should interfere
with the establishment of a single purchaser concept as provided in
H.R. 4845. Software procurement offers great potential for savings.
Under this coordinated Governmentwide ADP management program,
Government expenditures for these goods and services would be closely
defined. Once properly identified, there could be more effective man-
agement of software procurement either directly by the agencies or by
GSA in conjunction with hardware acquisition. There is no reason
why Government software acquisition cannot be subjected to more
systematic and orderly procurement procedures. There is also greater
potential competition in software procurement, since software does
not necessarily have to be furnished by the manufacturer of the equip-
ment.
USE OF REVOLVING FUND PROVIDED IN H.R. 4845 TO OBTAIN VOLUME
ACQUISITIONS
The revolving fund concept provided in H.R. 4845, as discussed
above, is needed to provide the Government with an accurate, up-to-
date flow of fiscal information and to facilitate optimum ADP util-
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AUTOMATIC DATA PROCESSING EQUIPMENT
ization through sharing and joint use of equipment. But, the most
compelling need for the revolving fund is in establishing the single
purchaser concept in Government ADP acquisition.
Under this arrangement, GSA would have all of the Government's
general purpose ADP acquisition money in its pocket and would be in
a position, once all aspects of the coordinating program have been
fully implemented so that adequate information of prospective Gov-
ermnent agency requirements is available, to offer ADP manufacturers
firm contracts for specific amounts of ADP equipment. In turn, GSA
could reasonably expect to receive some reduction in purchase and lease
prices reflecting the magnitude of the Government's acquisition.
The revolving fund established under II.R. 4845 would be primed
with capital appropriated directly by Congress and augmented by the
unamortized value of the general purpose equipment now in Govern-
ment. agencies which the Government has purchased. GSA would
use these funds to acquire by lease or purchase the ADP needed to ful-
fill the requirements of the various agencies.
Essentially, all Federal agencies would lease equipment from the
GSA revolving fund. So far as the agencies are concerned, only the
budgetary personnel would know the difference. GSA would ac-
T uire the ADP systems selected by the management of the agencies.
he agencies would use the equipment as long as they wished, in
any manner they saw fit, subject to the general policy and fiscal con-
trol of the Bureau of the Budget, the President., and the Congress
as normally applied to all agency operations.
In practice, GSA would bill the agencies periodically at rates re-
flecting the use value of the equipment with the aim that the fund
break even at the end of each fiscal year. The agencies in turn would
obtain annual appropriations to reimburse the revolving fund for the
use of the equipment selected by and assigned to them. GSA could
obtain direct appropriations covering all overhead expenses incident
to operating the revolving fund, except that direct expenses incurred
in operating multiageney centers would be prorated among the user
agencies in their reimbursements. This is a matter, however, which
the committee leaves to the discretion of the Appropriations Com-
mittees.
Aside from the establishment of a single purchaser concept and
simplifying the interagency transfer of equipment, the coordination
of equipment has a number of other advantages, two of which are of
particular importance. First, this approach would provide an effec-
tive means for making essential lease versus purchase, evaluations on
the basis of the benefit to the Government as a whole. Second, consoli-
dated acquisition would allow the Government to purchase on a prior-
ity basis those ADP systems with the greatest purchase advantage.
LEASE VERSUS PURCHASE EVALUATIONS ON A GOVERNMENT-WIDE BASIS
UNDER H.R. 4845
H.R. 4845 would provide an effective means for making essential
"lease versus purchase" evaluations on the basis of the benefit to the
Government as a whole. BOB Circular A-5145 issued in October
"Hearin`s on H.B. 4845, V. 2M.
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1961, provided that agencies should make ADP lease versus purchase
evaluations in anticipation of equipment acquisition. The March
1963 GAO report recommended that. lease versus purchase evalua-
tions be made from the standpoint of the estimated useful life of the
equipment to the Government as a whole rather than the estimated
period of application of the initial user agency.
This estimate of economic useful life is an essential element in the
lease versus purchase evaluation. Generally, it is the comparison of
the projected lease payments over the period of useful life as com-
pared with the purchase price and maintenance costs (less the equip-
ment's residual value) that determines the comparative advantages
of these two modes of acquisition. When the lease payments over
the period of the estimated useful life exceed the purchase price and
maintenance costs, this concept of evaluation indicates purchase is the
most economical approach. The shorter the estimated period of use-
ful life, the more likely the evaluation will favor the lease of
equipment.
Ideally, competitive forces should push lease rates toward the cost
of ownership (purchase price plus maintenance plus interest on capi-
tal investment) over the equipment's useful life. But conditions in
the ADP industry are far from ideal. At present, the lease pay-
ments for most ADP components equal the cost of ownership in a
relatively short period, seldom exceeding 45 to 50 months,4e although
the useful life of most ADP equipment is estimated at between 5 and
10 years."' In a recent study, the Department of Defense estimated
that the lease payments on most ADP equipment equal the purchase
price within 21/2 to 41/2 years.48 Whatever the reasons may be and
any justification that can be attached to them, ADP manufacturers
in the case of most components are accelerating the amortization of
the capital invested in leased equipment to the serious economic dis-
advantage of those leasing it for any extended period.
As a result, at this time agencies and others users leasing equip-
ment pay out in a relatively short period in the form of lease pay-
ments an amount equivalent to a substantial portion of the purchase
price. Thus, even in those instances where the initial acquiring agency
does not foresee an estimated period of application of a duration suffi-
cient for the projected lease payments to equal the purchase price, the
Government should nevertheless evaluate the potential savings in-
herent in purchase. The additional investment in many cases would
be a relatively minor portion of the purchase price. Weighed
against the aditional investment would be use of the equipment
with only maintenance costs for the remainder of its useful life.
The GAO logically suggests that the estimated period of equip-
ment application by the initial acquiring agency may not constitute a
realistic estimate as to the economic useful life of the equipment to
the Government,as a whole. The Government has countless needs
for ADP equipment of varying degrees of sophistication. Some of
the most costly ADP with the greatest capacity and speed is used in
defense, space, and intelligence. In these areas, there is a continuing
need for the most advanced equipment. Yet throughout the Gov-
" Fortune, op. cit., p. 207.
47 Financial Advantage of Purchasing Over Leasing, Comptroller General (March 1963),
p. 15.
48 Contract Support Service Project, Department of Defense, Project Star Report
(Mar. 91. 1965), p. 79.
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32 AUTOMATIC DATA PROCESSPiG EQUIPMENT
ornment there are other agencies with less demand in requirements
that can use this equipment on a secondary basis. Under these cir-
cumstances, it is wholly unrealistic for various agencies acquiring
costly, highly sophisticated ADP systems to make the necessary lease
versus purchase evaluations based upon estimated periods of appli-
cation limited to their own requirements. The 1965 BOB study re-
jected the GAO recommendation on Government-wide lease versus
purchase evaluation, and some agencies, notably the Defense Depart-
ment, concurred. In the Department's report on H.R. 4845 the argu-
ment against Government-wide evaluations is stated as follows :
It has been stated that a principal advantage of central
ized procurement of ADPE is that lease/purchase decisions
could be made on the basis of the total Government re-
quirement for the equipment over its useful lifespan rather
than on the basis of estimated use by the acquiring organi-
zation. The Department of Defense position, based upon
extensive experience with this type of equipment, is that
it is practically impossible for a smgle agency to determine
potential secondary users within the agency at the time of
initial acquisition and that it is completely unrealistic to
assume that any agency can make such determinations for
the Government as a whole.49
The GAO has never suggested that Government-wide evaluations
depend upon the specific identity of secondary users and their require-
ments at the time of equipment acquisition. And, were the identity
of secondary users essential, the Defense Department's arguments
could preclude lease versus purchase evaluations based upon the pro-
jected Government-wide use of equipment. It is reasonable that
competent officials fully cognizant of Government ADP inventories
and applications and knowledgeable of the capacities of the various
systems the Government acquires could on a sound, businesslike basis
attribute secondary usage potential to certain selected systems which
in their judgment have long-range utilization within the Government..
Several of the agencies, and particularly the Department. of De-
fense, have expressed concern over the possibility of acquiring a large
volume of excess Government-owned equipment with its accompany-
ing administrative and storage expenses. however, there is no reason
to anticipate such a problem.' It is not the policy of the Government
to store excess equipment for long periods of time, but to sell it as
surplus in such a manner that the Government receives the fair market
value of the property. Purchasing under these circumstances would
be on a highly selective basis. In those instances when the Govern-
ment did purchase a system, and no secondary utilization developed at
the time it became excess to the initial using agency, the equipment
would be relatively new and the residual value correspondingly high.
PRIORITY OF PURCHASE OF SYSTEMS WITII GREATEST PURMASE ADVANTAGE
UNDER CONSOLIDATED PROCUREMENT
Government ADP use is expected to increase indefinitely. Increas-
ing billions in tax funds will be involved. It may not always be pos-
sible for the President and the Congress to allocate sufficient capital
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to the revolving fund to cover the purchase of all ADP systems which
careful agency and Government-wide evaluations dictate should be
purchased rather than leased. If the Government is to receive the
most value for its dollar, those systems with the greatest purchase
advantage to the Government as a whole should be purchased with the
funds available. Budgetary considerations and funding problems in
the various agencies should not preclude the Government from pur-
chasing ADP equipment on a priority basis.
This problem was recognized in the 1965 BOB study and was dis-
cussed in connection with "Budget Considerations" :
Decisions with respect to the purchase or rental of a com-
puter inevitably become involved in budget considerations.
In most cases, budgets can be prepared or adjusted to accom-
modate either decision. In other casesz an administrator with
limited funds available to perform his mission -may. find it
undesirable to devote a substantial portion of his funds to a
capital investment if doing so will force him to forego an
essential element of his 'operating program. In these cases,
the choice reflects a decision on whether the purchase of equip-
ment will yield a return in the form of long-range savings
that is mreater than the return to be obtained by devoting
the funds to another purpose. In Government-unlike most
industries where similar judgments must be made-this deci-
sion often cannot be validated by agencies because the benefits
resulting from public service functions usually can be meas-
ured only by value judgments. Although it is recognized
that budget considerations may, at times, cause a temporary
deferral of a decision to purchase, the circumstances' should
be fully documented to show justification for such action, and
steps should be taken. to effect the budget adjustments which
would permit purchase as early as practicable.''
At this time an agency with budgetary problems may well have to
postpone the purchase of ADP equipment. Yet, at the same time,
another agency may acquire another system requiring a comparable
outlay of capital in which the advantage of purchase over lease is sub-
stantially less. Under the present agency-by-agency approach, not
only can individual agency budgetary problems arbitrarily interfere
with the Government's purchase of equipment which lease versus pur-
chase evaluations indicate should be purchased but, more important,
there is no simple and effective means for the systematic purchase of
that equipment which on a priority basis offers the Government as a
whole the greatest purchase advantage. Under H.R. 4845 through the
use of the revolving fund, GSA could very easily apply available ADP
capital to the purchase of that equipment offering the highest purchase
advantage.
G. H.R. 4845 AUTHORIZES EXEMPTIONS AND PERMITS GSA To
DELEGATE AUTHORITY TO AGENCIES IN THE ACQUISITION OF
EQUIPMENT
As previously discussed in this report, general-purpose ADP systems
are made up of various combinations of mass-produced, commercially
available components. It is these general-purpose, mass-produced,
801885 BOB ADP study, p. 35.
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commercially available ADP components and the systems created from
them that come within the confines of this legislation. Digital and
analog components forming a part of tactical weapons or space sys-
tems which have no general-purpose applicability would be wholly
excluded from this program. Procurement of this latter equipment
would remain the complete responsibility of the Defense Department
and other agencies that have requirements in these areas.
General-purpose, mass-produced, commercially available ADP com-
ponents used in conjunction with specially designed components and
as parts of systems with unique scientific cryptologiealj or military ap-
plications of a strategic nature would also come within provisions of
this legislation for acquisition, inventory control, and potential second-
ary usage although such components or systems might not be available
for sharing. Generally, there is no justification for exempting such
components simply because the equipment is initially applied to some
highly specialized application or used under conditions which preclude
sharing. Once the components selected by the agency are acquired
by GSA, they would be turned over to the agency to be used in what.-
ever specialized application the agency had planned with no further
participation by GSA except, inventory reports until the component
participation
surplus.
Examples of equipment coming within this category would be the
ADP used "in line" to control space vehicles in flight and the backup
or redundant. systems which must be available for this purpose. Also,
tequipment used in highly sensitive security work by agencies such as
Federal Bureau of Investigation and the Central Intelligence
gency (CIA), which offer no potential for sharing, could readily be
acquired under a general Government acquisition program and-used
for other pu when surplus to the initial acquiring agency.
Although t ie ADP to be included under this management program
could be more closely defined at this time, the committee is concerned
that rapidly shifting developments in the interrelated fields of defense,
space, communications, and ADP could make any presently acceptable
distinctions obsolete. And, as this legislation involves the internal
operations of the Government, there is no pressing need for strict
statutory definitions. As in keeping with the general concept of H.R.
4845, the specific definition of general-purpose ADP equipment is left
to the BOB and GSA and the issuance of appropriate regulations.
EXEMPTION OF INDIVIDUAL SYSTEMS FOR REASONS OF NATIONAL SECURITY
OR DEFENSE OR ECONOMY AND EFFICIENCY
As backup to avoid compromise of our national security or defense
and to assure economy and efficiency, the Administrator of General
Services is authorized to exempt individual systems from provisions
of this program. It is of paramount importance that agencies with
intelligence or secret responsibilities maintain their security in line
with appropriate Federal statutes and as the President might direct
under
EXEMPTION OF EQI II'MEXT BY AGENCY MEADS
The Department of Defense strongly recommends that. language
be included in the bill affording the agency heads the discretion of
exempting equipment from provisions of this management program.
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AUTOMATIC DATA PROCESSING EQUIPMENT 1 35
The DOD's recommended amendment is in such broad terms,as to per-
mit the Department, in the discretion of the Secretary of Defense, to ex-
clude all Defense Department ADP.51 As the Comptroller General
has so strongly recommended, any exclusion of an entire agency from
this management program would be wholly inadvisable. Realis-
tically, such discretion in agency heads might soon exclude all Gov-
ernment ADP which otherwise would come within this program.
In view of the authority extended the Administrator of GSA to
exempt specific systems from the program for reasons of either
national security and defense or economy and efficiency, the commit-
tee does not believe that any general exemption, such as the DOD
recommends, would be appropriate. Furthermore, as expressly pro-
vided in the bill, should GSA make any decision which the user feels is
adverse to his interests, the appropriate agency would have the right
to appeal to the BOB, and, if the problem was of sufficient magnitude,
to the White House. Under H.R. 4845, this entire management
program would be under the express direction of the President. Ex-
clusionary authority such as the DOD suggests is therefore un-
necessary and inappropriate.
GRADUAL IMPLEMENTATION OF MANAGEMENT PROGRAM
Implementation of the coordinated ADP management program pro-
vided in H.R. 4845 would be gradual. Subsection 111(b) (2) expressly
provides that the Administrator may delegate authority extended to
him under provisions of this legislation to the extent he considers
such action `necessary and desirable for the orderly implementation
of a program for the utilization of such equipment." Utilizing this
authority, the Administrator would implement this more effective
management program on an orderly step-by-step basis so as to
avoid the disastrous dislocations that would undoubtedly accompany
an attempt to completely alter management of ADP overnight.
Upon approval of this program, an initial step would be to establish
a comprehensive inventory system carefully designed by experts so
that necessary recurring information needed for all levels of Govern-
ment ADP management would become routinely available. Col-
lateral to the establishment of this inventory, GSA would seek
appropriations from Congress to set up the ADP revolving fund
and work out with representatives of the various agencies the most
acceptable methods by which the agencies would reimburse the fund
for equipment use. After the revolving fund is established, GSA
could provide for the transfer of presently held general purpose ADP
components to the fund.
Once accurate, up-to-date information on available capacity and
prospective requirements became available, a more advanced sharing
program could be developed. Using ADP equipment, GSA could
examine various sharing alternatives and fully exploit available, but
unused, Government capacity in meeting the Government's require-
ments. Essentially, GSA, with adequate information, could place
Government sharing under positive direction.
After the inventory system and the revolving fund have both been
set up and other aspects of the program have been implemented, GSA
would then begin to coordinate Government acquisitions to achieve a
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36 AUTOMATIC DATA PROCESSING EQUIPMENT
larger volume of purchases and leases or combinations thereof. The
savings inherent in this management program do not require compro-
mise in the selection or the use of the equipment. If an agency has an
unexpected need for ADP or if an agency deadline must be met., these
delivery requirements must not be ignored to achieve greater volume
acquisitions. However, if agencies keep GSA's inventory system fully
apprised of future requirements through a system of long-range plan-
ning and forecasting this information can be used to coordinate and
bring about volume acquisitions and more reasonable purchase and
lease prices.
II. CONCLUSION
This legislation is essential to effective Government ADP manage-
ment. Constituting a broad perimeter of authority to BOB, GSA, and
the Department of Commerce it provides the management techniques
which have heretofore been lac in Government ADP manage-
ment. The bill emphasizes the need for adequate information in effec-
tive management and Government-wide coordination. The bill also
recognizes the desperate need to improve the Government's bargaining
position in equipment acquisition.
Numerous APP management problems remain to be resolved. Al-
though H.R. 4845 does not extend to agency equipment selection, every-
one concerned agrees that there is a critical problem in this area.
Equipment compatibility and "input and output" standardization
must also be dealt with in substantive terms. They cannot be solved
directly through legislation. But if the Government's ADP manage-
ment is put in order through the establishment of this Government-
wide coordinated management system, these other costly and difficult
problems can be more easily isolated and resolved and the Govern-
ment's use of ADP made more effective. At this time, most Govern-
ment ADP applications fall within the more routine data processing
capabilities of this equipment. The Government's checkbook is kept
balanced through ADP, but ADP, though it has the potential, is not
widely used in evaluating the most efficient manner in which Federal
funds should be spent. During the years to come, ADP will be used
more and more in the decisionmaking process and the Government
ADP equipment costs will surpass any sum we can now imagine.
During the course of this committee's consideration of ADP legls-
lation over the past 1, years, numerous agencies have been skeptical of
the need for legislation as well as certain provisions of this particular
bill. The committee does not expect this program to be implemented
without difficulty. But the difficulties that might be met after passage
of II.R. 4845 are much preferred over those which at this time and in
years past, unnecessarily cost the taxpayers hundreds of millions an-
nually. Based upon two comprehensive BOB ADP management
studies, about 100 General Accounting Office audit reports, andeyears
of active investigation by this committee, the time has come for Con-
gress to take reasonable but effective action to assure the establish-
ment of efficient ADP management in Government.
IV. COMMITTEE AMENDMENTS
The committee recommends the adoption of six amendments to
H.R. 4845:
First, the language "or at the expense of" is deleted from subsection
111(a) of the. bill on page 2, line 1, so as to exclude ADP equipment
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AUTOMATIC llA A C'El
needed to meet the requirements of Government contractors and others
acquired at the Government's expense. For this purpose, the phrases
"and other users", page 5, line 22, and "or user", page 6, line 1 are also
stricken.
During the past ,3) years the committee has received 29 General Ac-
counting Office audit reports outlining serious deficiencies in the man-
ner in which Government cost.-type contractors acquire ADP equip-
ment. The 1965 BOB study recommended that effective lease versus
purchase evaluations be made regarding contractor equipment ac-
quired at the Government's expense. On June 9, 1965, the Secretary
of Defense approved a report recognizing that a serious problem
existed in this area and recommended improvements in DOD manage-
ment of this equipment.
Aerospace Industries Association of America, representing most
Government contractors with ADP equipment that would be affected
by this legislation, has expressed concern over the possible impact on
their operations of extending this Government-wide inventory and
acquisition coordinating system to ADP used. in the fulfillment of
space and defense contracts. For this reason, it is concluded that a
more appropriate course of action at this time would be to provide for
this management system limited to in-house Government ADP. As
this new management system is implemented within the Government,
the success of the recently announced improvements in the Defense
Department management of contractor ADP equipment could be
evaluated. It; is the committee's intention to follow developments
closely so that appropriate action can be recommended should devel-
opments indicate that inclusion of contractor equipment, acquired at
the expense of the Government, under this coordinated Government
inventory and acquisition system is needed for the protection of the
taxpayers' interest,.
Subsection 111(b) (1) provides that-
* * * In carrying out his responsibilities under this sec-
tion the Administrator is authorized to transfer automatic
data processing equipment between Federal agencies, to re-
quire joint utilization of such equipment by two or more
Federal agencies, and to establish and operate equipment
pools and data processing centers for the use of two or more
such agencies tivlien necessary for its most. efficient and effec-
tive utilization.
Authorizing the Administrator to "require" joint utilization of
equipment as provided above might be interpreted to conflict with pro-
visions in subsection 111(g) which provide that the Administrator of
GSA shall have no authority to interfere with the determination by
the agencies of their individual ADP equipment requirements. To
forestall any possible contradictions in the subsections, the committee
recommends that IT.R. 4845 be amended to authorize the Administra-
tor to "provide for" joint utilization of such equipment.
Another amendment would provide for a comprehensive annual
report to Congress on the ADP management program established by
this legislation. In addition to an account of receipts, disbursements,
and transfers to miscellaneous receipts as required in subsection 111(c)
the Administrator would be required to submit an annual report of
"equipment inventory, utilization, and acquisitions."
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The other amendment would provide a more sspecific meaning to the
term "requirements" as used in subsection 111(g} of the bill. The
amendment would add the phrase "including the development of
specifications for and the selection of the types and configurations of
the equipment. needed" to the second sentence in subsection 111 g).
The Controller of the AEC strongly recommends this additional
language as a clearer manifestation of the committee's intent that GSA
not come between the manufacturer and the user in the determination
of requirements or selection or use of equipment.
The committee's confidence in the Administrator of GSA is mani-
fested in the broad authority extended him under this legislation. The
committee is not concerned that H.R. 4845, without this amendment,
would cause any disruption in user agency responsibilities in these
areas. However, as the additional language fully reflects the commit-
tee's intent, it is recommended that this clarification as to what is meant
by the term "requirements" be added to the bill. It should constitute
a further assurance to the agencies that it is neither the purpose nor
the intent of this legislation that their responsibilities in the selection
and use of ADP equipment be compromised in any way.
V. SECTION-BY-SECTION ANALYSIS OF II.P. 4845
H.R. 4845 would add section 111 to the Federal Property and Ad-
ministrative Services Act of 1919 (63 Stat. 377), extending responsi-
bility to the Administrator of General Services, subject to overall
direction by the President and fiscal and policy control by the Bureau
of the Budget, for the economic and efficient purchase, lease, and utili-
zation of automatic data processing equipment necessary to meet the
requirements of the Federal Government. The proposed new sec-
tion is divided into seven subsections. Subsections (a) and (b) pro-
vide the basic authority to be exercised by the Administrator of GSA.
Subsection (c) authorizes the establishment of a revolving fund to
finance the activities undertaken by the Administrator in pursuance
of this authority. Subsection (d) provides for the. administration of
this fund, and subsection (e) prescribes that other provisions of law
which are inconsistent with the provisions of this section shall not be
applicable in the administration of this section. Subsection (f) au-
thorizes the Secretary of Commerce to undertake necessary research
and to provide scientific and technological advisory services relating
to the use of automatic data processing in the Government. Subsec-
tion (g) provides that the authority conferred by this section shall be
exercised subject to direction by the. President and by the Bureau of
the Budget..
Subsection (a) authorizes and directs the Administrator to coordi-
nate and provide for the purchase, lease, and maintenance of auto-
matic data processing equipment to meet the requirements of Federal
agencies.
Subsection (b) authorizes the Administrator to provide automatic
data processing equipment suitable for efficient and effective use by
Federal agencies through purchase, lease, or transfer of equipment be-
tween Federal agencies, to provide for joint use of equipment by two
or more agencies, and to establish and operate equipment pools and
data processing centers when such action in his opinion is necessary
for the economical and efficient utilization of such equipment on a
Government: wide basis. The Administrator is also authorized to
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provide for the maintenance and repair of such equipment by contract
or otherwise.
Subsection (b) further allows the Administrator to delegate author-
ity under this section to Federal agencies to lease, purchase, and main-
tain individual systems or specific units of equipment when, in his dis-
cretion, such action is either necessary for economy and efficiency of
operations, or when such action is essential to national defense or
security. Authority may also be delegated in such circumstances to
an agency to operate ADP equipment pools and processing centers.
Solely on an interim basis, the Administrator is further authorized to
delegate authority on a general basis in his discretion to the extent
necessary or desirable to allow for the orderly implementation of this
coordinated Government-wide management program.
The term "Federal agency" as.used in this section 111, is defined
in the Federal Property Act to which H.R. 4845 is an amendment.
The term extends to "any executive agency or any establishment in
the legislative or judicial branch of the Government (except the Sen-
ate, the House of Representatives, and the Architect of the Capitol
and any activities under his direction)."
Subsection (c) authorizes the establishment of an automatic data
processing fund. This is to be a fund without fiscal year limitation
to be used to finance expenses incident to the Government-wide data
processing program provided for in this section. Such expenses in-
clude those incurred for personal services, purchases, rentals, mainte-
nance and repair, and direct operation costs of ADP service centers,
as well as other related costs. Following receipt of advice of agency
requirements and appropriate evaluations as to the availability of cur-
rently held equipment, the Administrator would, when necessary, pur-
chase equipment through use of capital in the fund, or if more advan-
tageous, lease equipment through use of such funds.
To keep the capital of the revolving fund intact, the user agency
would reimburse the Administrator for the use of the equipment on
an annual or other periodic basis in sums as determined under sub-
section (d). Periodic payments would be made for regular, recurring
services, and individual payments for specific intermittent services.
User agencies would include in their budgets requests for funds neces-
sary to meet these charges. However, to provide for the additional
capital to cover equipment purchases during the period of initial
implementation of the program, and to cover future increases in
capital fund requirements (reflecting greater Government-wide utili-
zation of such equipment), the Administrator would make requests in
the budget of the General Services Administration for capital to be
placed in the revolving fund.
The language of subsection (c) is sufficiently broad to include the
cost of administration of the program if it appears at a later date
that such costs should be paid from the revolving fund. However, in
order to avoid confusion during the initial period of implementation
of the program, the committee feels that such costs should at least
temporarily be provided for by direct appropriation as is provided in
subsection (d). Depending upon later developments, these costs
would then be paid from direct appropriations or from the revolving
fund at the discretion of the appropriations committees of Congress.
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AUTOMATIC 44 ))Subsection (c) further provides that a report of receipts, disburse-
ments, and transfers from the fiord shall be made annually in con-
nection with the budget estimates to the Director of the Bureau of the
Budget and to the Congress. Incident to these reports, general esti-
mates of expected expenditures for the next fiscal year would be fur-
nished the appropriations and other congressional committees upon
request as a further assurance of congressional control and supervision
of this program. Subsection (c) also contains a provision for the
inclusion in appropriations acts of provisions regulating the operation
of the ADP fund or limiting expenditures from the fund, The pur-
pose of this provision is to assure that the appropriate control over
the expenditure of funds by a Federal agency remains in the Congress.
Subsection (d) authorizes appropriations to the revolving fund in
such amounts as may be required. It is further provided that sums
so appropriated, together with the value of supplies and equipment
transferred to the. Administrator, shall constitute the capital of the
fund. The fund is also to be credited with advances and reimburse-
ments from appropriations and the payments of any agency, organi-
zation, or contractor utilizing or receiving services from equipment.
Rates for use of the equipment or for services received therefrom are
(red
to be fixed by the Administrator so as to approximate the, cost char?--
to the fund, including depreciation and accured leave, the amortiza-
tion of installation costs, direct costs of o crating service centers, as
well as other items of expense recognized and acceptable from the
standpoint of sound accounting practices. Prior to fiscal year 1967,
it is contemplated that appropriat ions will be provided for certain
direct operating costs. Provision is made in subsection (d) to avoid
inclusion of such itei1is in the. determination of the rates charted user
agencies. The indirect administrative costs of operating tTCie fund
would in later years be included in rates charged the user agencies
only if the congressional appropriations committees determine that
such costs should be paid out of the revolving fund as provided in
Subsection (c).
Finally, refunds or recoveries resulting from operations, such as
net proceeds of disposal of fend property as excess or surplus and
moneys received in settlement of loss or damage claims, are to be
credited to the fund. After the close of each fiscal year net income
not required to offset, prior year losses is to be transferred to the Treas-
ury as iniscel lancous receipts.
Subsection (e) provides for the inapplicability of other provisions
of law which otherwise would limit the authority of the Administrator
under this proposed amendment to the Federal Property and Admin-
istrative Services Act of 1949, and specifically, the proviso following
paragraph (4), section 201(a) of that act, extending certain authority
to the Secretary of Defense to exempt. the National Military Estah-
lishment from provisions of the Property Act, as well as provisions
of section 602 (d) of this act granting exemptions to the Atomic
Energy Commission, TVA, and others.
The Secretary of Commerce is authorized in subsection (f) to pro-
vide scientific and technological advisory services relating to ADP
to the agencies and particularly to the Administrator of General
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Services in exercising the authority delegated in this legislation. The
Secretary of Commerce is further authorized to make recommenda-
tions to the President relating to the establishment of uniform Federal
ADP standards. This subsection also delineates the authority of the
Secretary of Commerce to undertake research in the sciences and tech-
nologies of automatic data processing systems. It is not intended
that activities carried out under this authority duplicate or preclude
research being done by other Government agencies or private industry.
Subsection (g) provides that the, authority conferred upon both
the Administrator of General Services and the Secretary of Corn-,
merce by this amendment shall be exercised subject to direction by
the President and to fiscal and policy control by the Bureau of the
Budget. The Administrator is specifically precluded from impair-
ing or interfering with the determinations by the agencies of their
ADP requirements. Under this program the user would develop the
specifications for and select the type and configuration of equipment
needed. The Administrator would then procure the selected equip-
ment and supply it to the users. The Administrator is further pre-
cluded from interfering with or attempting to control in any way the
use of equipment or components furnished to the agencies out of the
fund. The Administrator is required to give adequate notice to all
agencies and other users of any proposed determination specifically
affecting them or equipment used by them. If the user concerned and
the Administrator fail to agree on the proposed determination the
issue shall be subject to review and decision by the Bureau oY the
Budget, or as the President may otherwise direct.
VI. AGENCY REPORTS ON H.R. 4845
(The agency reports and comments received on H.R. 4845 follow:)
COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D. C., March 22,1965.
Hon. WILLIAM L. DAWSON :
Chairman, Committee on Government Operations,
House of Representatives.
DEAR MR. CHAIRMAN : Reference is made to your letter of February
19, 1965, and letter of February 26, 1965, from the chairman of your
Government Activities Subcommittee requesting our comments on
H.R. 4845. This bill would provide for the economic and efficient
purchase, lease, maintenance, operation, and utilization of automatic
data processing equipment by, or at the expense of, Federal depart-
ments and agencies.
In our letter to you of May 15, 1963 (B-151204), we submitted our
views regarding H.R. 5171, 88th Congress, a similar bill to H.R. 4845,
89th Congress. Also, by letter of August 4, 1964, we made a report to
the chairman of the Senate Committee on Government Operations on a
proposed amendment of H.R. 5171 in the nature of a substitute that
was prepared in an effort to meet objections of the Federal agencies
to the provisions of H.R. 5171 as passed by the House of Representa-
tives. In our comments on H.R. 5171 and the amendment to H.R.
5171, we expressed the belief that enactment of the bill would be in
the interest of the Government and would result in considerably more
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economical procurement and utilization of automatic data processing
equipment.
In commenting on H.R. 5171 and on the proposed amendment in the
nature of a substitute for H.R. 5171, we included the following state-
ment which we feel reflects our views on this matter:
"In our report to the Congress dated March 6, 1963 (B-115369), on
the `Financial Advantages of Purchasing over Leasing of Electronic
Data Processing Equipment 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 recommend 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 effectively accomplished through the efforts of a small, highly
placed central management office in the executive branch of the Gov-
ernment. 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 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 II.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 note that the proposed bill, II.R. 4845, provides in paragraph
(g) that the authority conferred upon the Administrator and the
Secretary of Commerce by this legislation shall be exercised subject to
direction by the President and to fiscal and policy control exercised
by the Bureau of the Budget.
In our report to the Congress dated April 30, 1964 (B-115369), on
the "Review of Problems Relating to Management and Administra-
tion of Electronic Data Processing Systems in the Federal Govern-
ment," we reviewed several problems pertaining to the management
of EDP systems in the Federal Government. We commented that
these problems have arisen largely because of the decentralized system
of management used whereby each using agency makes its own deci-
sions on the procurement and utilization ofEDP equipment without
regard to the economies available from considering overall Govern-
ment needs. We further commented that our review of these problems
and the manner in which they can be resolved to the maximum finan-
cial advantage of the Federal Government has reinforced our earlier
conclusion that an effective central management organization with
appropriate authority and responsibility is needed to exercise control
over the procurement and use of data processing facilities and related
costs being incurred by the Government.
In addition to our March 6, 1963, and April 30, 1964, Government-
wide reports, we have issued 64 reports to the Congress covering
reviews made of selectiud aspects of individual agency or Government
contractor automatic data processing systems. Those reports have
contained numerous examples of deficient management of automatic
data processing equipment and of potential savings through more
effective and centralized management of these facilities.
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With reference to the policies and procedures set forth in the bill,
we offer the following comments for consideration :
1. We suggest that the following sentence in subsection 111(g),
pages 5 and 6, be deleted : "The Administrator shall not interfere with,
or attempt to control in any way, the use made of automatic data proc-
essing equipment or components thereof by any agency or user."
This provision would place undue restrictions on the Administrator
of General Services which would preclude the attainment of the most
effective and economical procurement and use of automatic data proc-
essing equipment. We believe that this provision conflicts with other
authorities granted the Administrator.
Furthermore, we believe that this provision could negate the author-
ity granted in section 111(b) (1) to the Administrator to require joint
utilization of automatic data processing equipment by two or more
agencies or to establish and operate equipment pools and data process-
ing centers for the use of two or more agencies if those agencies are
unwilling to operate in such manner.
2. The bill Provides that a report of receipts, disbursements, and
transfers to miscellaneous receipts relating to the automatic data proc-
essing funds be made annually to the Director of the Bureau of the
Budget and to the Congress. The type of report called for is some-
what limited and we would recommend that the bill require a more
complete financial report. Accordingly, we suggest that the words
"a report of receipts, disbursements, and transfers to miscellaneous
receipts, under this authorization" be deleted and the following substi-
tuted : "appropriate reports on the financial operations of the fund in
accordance with the regularly established requirements of the Bureau
of the Budget."
3. We suggest that the bill provide that, after a date determined
upon, based on recommendation of the Administrator, existing appro-
priations and, unless specifically so provided, future appropriations of
the agencies concerned, other than appropriations to the fund, shall
not be available for the purchase or lease of automatic data processing
equipment of the types taken over by the Administrator or for obtain-
ing similar automatic data processing services by contract.
4. We note the term "organization" appearing on page 4, lines 5
and 6 of the bill. If by use of this term it be intended to authorize
the Administrator to make equipment available for, or otherwise
supply services to, private organizations, which would constitute an
exception to section 3678, Revised Statutes, 31 U.S.C. 628, requiring
the application of appropriations 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.
5. We suggest that a provision be added to the bill to provide that
no executive agency shall be exempt from the provisions of the bill
except under extraordinary circumstances.
6. With regard to the applicability of this legislation to Govern-
ment contractors, we understand the reference on page 2 of the bill, "or
at the expense of, Federal agencies" is intended to extend authority of
the Administrator over contractor equipment under negotiated
contracts.
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UTOMATIC We have taken the position that, to the maximum extent practicable,
data processing 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 be fur-
nished 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. .
Government and will result in considerably more economical procure-
ment and utilization of electronic data processing equipment. There-
fore, and subject to the changes suggested above, we favor enactment
of the proposed legislation.
We will be available to testify at the proposed hearings and we will
be pleased to assist the committee in any respect with regard to this
matter.
Sincerely yours,
JOSEPH C AMFBELL, Comptroller General.
EXECUTIVE OFFICE OF THE PRESIDENT,
BUREAU OF THE BUDGET,
Washington, D.C., hfarch.11,1965.
HOD. WILLIAM L. DAWSON,
Chairman, Committee on Go i'ernment Operations,
House of Repreaentatives,
Washington, D.C.
DEAR Mit. CHAIRMAN : This will acknowledge your letter of Febru-
ary 19, 1965, inviting the Bureau of the Budget to comment on H.R.
4845, a bill to provide for the economic and efficient purchase, lease,
maintenance, operation, and utilization of automatic data-processing
equipment by the Federal departments and agencies.
President. Johnson transmitted to the Congress on March 2,1965, a
report on Federal policy and practices in the acquisition and utiliza-
tion of electronic computers in Government: The report., prepared by
the Bureau of the Budget, is based on the results of a year-long study.
It proposes a broad program to achieve increased effectiveness, coupled
with greater economy, in the expanding use of automatic data-proc-
essing equipment. Ina letter transmitting the report to the Congress,
the President indicated that the policies and suggestions for improve-
ment outlined in the report had his approval.
Under the policies approved by the President, agency heads are held
responsible for taking necessary actions to assure the most efficient and
economic administration and management of their ADP activities.
Within that framework of responsibility, the President expects the
central agencies-the Bureau of the Budget, the General Services Ad-
ministration, and the Civil Service Commission-to develop policies
and guidelines for the improved management and utilization of ADP
and to exercise leadership in promoting interagency cooperation,
coordination, sharing arrangements, and other measures to assure that
the Government's ADP requirements are met effectively and at mini-
mum cost.
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AUTOMATIC DATA PROCESSING EQUIPMENT 45
To carry out the recommendation made in the Bureau's report, no
significant changes would be required in existing organizational ar-
rangements or in the assignment of responsibilities to the Bureau of
the Budget, General Services Administration, Civil 'Service Commis-
sion, Department of Commerce, or the departments and agencies. We
believe, however, that there is a clear need to strengthen le resources
devoted to the management of automatic data processing within both
the central agencies and the line departments. In addition, enactment
of legislation specifically addressed to the management of automatic
data processing in the executive branch of the Federal Government is
considered desirable to reinforce and amplify the broad general au-
thorities now vested in the Bureau of the Budget, General Services
Administration, and the Department of Commerce. The report con-
cludes that the lack of specific legislation now "creates unnecessary
handicaps to the most effective management of ADP."
Accordingly, the report recommends the enactment of general legis-
lation (1) providing an expression of congressional policy on the
acquisition and use of ADP equipment, and (2) giving a specific di-
rective to the Bureau of the Budget and the General Services Admin-
istration, within the areas of their presently assigned responsibilities,
to take necessary actions to assure the most economic and effective use
of ADP. The report also recommends that explicit legislative au-
thority be provided (1) for the establishment of a revolving fund to
facilitate the establishment of service centers, equipment pools, and
time-sharing arrangements, (2) to provide authority to develop, meas-
ure, test, and make provision for the approval and implementation of
Federal standards for ADP equipment and techniques and Federal
standard data elements and codes, and (3) to provide specific authority
and direction to the Secretary of 'Commerce to establish a centralized
research center on computer sciences and technology and to provide
advisory and consultative services to Government agencies on com-
puter systems development and related scientific and technical prob-
lems.
It is the view of the Bureau of the Budget that enactment of H.R.
4845 would assist materially in carrying out the policies and sugges-
tions for improving the acquisi'tion and utilization of electronic com-
puters which have been approved by the President. Accordingly, the
Bureau of the Budget recommends that your committee give favorable
consideration to H.R. 4845.
Sincerely yours,
PHILLIP S. HUGHES,
Assistant Director for Legislative Reference.
GENERAL SERVICES ADMINISTRATION,
Hon. WILLIAM L. DAWSON, Washington, D.C., March 15,1965.
Chairman, Committee on Government O erations,
House of Regrresentasves, Washington, D.C..
DEAR MR. CHAIRMAN : Your letter of February 19, 1965, requested
the views of the General Services Administration on H.R. 4845, 89th
Congress, a bill to provide for the economic and efficient purchase,
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46 AUTOMATIC DATA PROCESSING EQUIPMENT
lease, maintenance, operation, and utilization of automatic data proc-
essing equipment by Federal departments and agencies.
The bill would add a new section 111 to title 1 of the Federal Prop-
erty and Administrative Services Act of 1949, 63 Stat. 377, as amend-
ed, which would centralize GSA control over all electronic data
processing equipment required by Federal agencies. Financing would
be provided by a revolving fund established by the section. Original
capitalization of the fund would be by appropriation and transfer of
assets, which would be reimbursed through user charges.
The bill would provide legislation needed to supplement existing
statutory authorities, remove any doubt as to the authority for func-
tions presently being performed, and provide a clear statement of
congressional policy respecting ADP matters.
General Services Administration endorses the views set forth in
the letter of March 11, 1965, from the Director, Bureau of the Budget,
to the chairman, House Committee on Government Operations, in
support of H.R. 4846.
Accordingly, the General Services Administration recommends that
your committee give favorable consideration to H.R. 4845.
The Bureau of the Budget advises that, from the standpoint of the
administration's program, there is no objection to the submission of
this report to your committee.
Sincerely yours,
ROBERT T. GIN,
Acting Administrator.
THE SECRETARY or DEFENSE,
Washington, D.C., Alarch 18,1965.
lion. WILLIAM L. DAwSON,
Chairman, Committee on Government 0eratians,
House of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN : Reference is made to your request for the
views of the Department of Defense on H.R. 4845, 89th Congress, a bill
to provide for the economic and efficient purchase, lease, maintenance,
operation, and utilization of automatic data processing equipment by
Federal departments and agencies.
The Department of Defense concurs in the desirability of setting
forth in legislation an expression of policy by the Congress on the ac-
quisition and use of automatic data processing equipment by Federal
agencies. Such an expression of policy by the Congress would be of
assistance to the Bureau of the Budget and the General Services Ad-
ministration in coordinating the management of ADPE throughout
the Government.
As you know, the Bureau of the Budget and the General Services
Administration have already initiated actions which should materially
improve the management of ADPE. A Government-wide reutiliza-
tion program has been initiated within the last year which has been
implemented throughout the Department of Defense. Under guid-
ance provided by the Bureau of the Budget, AIDE sharing exchanges
are being established by the General Services Administration and
these actions are bein fully supported by the Department of De-
fense. Recently, the Bureau of the Budget issued Circular A-71
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AUTOMATIC DATA PROCESSING EQUIPMENT 4
which is designed to further improve the management of ADPE with-
in the Government and which specifically identifies the responsibil-
ities of all agencies in this regard. This circular is intended to im-
plement recommendations contained in the Bureau of the Budget
Report to the President on the Management of Automatic Data Proc-
essing in the Federal Government which the President approved and
transmitted to the Congress on March 2,1965.
The Bureau of the Budget Report expressed certain conclusion on
the matter of procurement and use of automatic data processing equip-
ment. It recommended that Government agencies retain their present
responsibilities for making decisions in this area, rather than have a
separate central office empowered with authority to make these deci-
sions. The latter course, the report concluded, will dilute the respon-
sibility of agency heads for the management of their organizations
and automated systems; and would serve to divorce ADP manage-
ment from the arrangements established by Bureau of the Budget Cir-
cular A-71 with respect to Presidential surveillance over the overall
management of the executive branch. It would also interfere with
direct Government agency-contractor relationships.
With respect to the establishment of a centralized revolving fund
for the acquisition and utilization of ADPE, the Bureau of the Budget
report, as approved by the President, limited its recommendations on
the use of such a fund to those situations involving the establishment
of service centers, equipment pools, and time-sharing arrangements or
where it would be advantageous for appropriate Federal agencies on
a permissive basis to finance the acquisition and utilization of ADPE.
There is contained in H.R. 4845 certain language which might be
construed to require, on a mandatory basis, Federal agencies and their
contractors to obtain their individual ADPE requirements through the
Administrator of General Services. The Administrator would pur-
chase, lease, or transfer from other Federal agencies the equipment to
meet these requirements. Exceptions would be permitted only at the
discretion of the Administrator. Regardless of which agency pro-
cured the equipment, the bill could be interpreted to require the use
of the centralized revolving fund provided for in subsection 111(c)
in all cases.
Use of such a fund on a mandatory basis would result in imposing
another step in the procurement of ADPE. Moreover, there would
be extra costs to Federal agencies resulting from surcharges necessary
to reimburse the General Services Administration for costs of operat-
ing the fund. In addition, it could discourage second and third users
of the equipment since they would be paying rentals to General Serv-
ices Administration for older and perhaps less efficient equipment
that might be as high or higher than what they would pay for the most
modern equipment. Under existing procedures for the utilization of
equipment excess to one agency by another agency, there is a clear
financial incentive to utilize such equipment. If it is Government-
owned, it can generally be acquired at no cost except for transporta-
tion, packing, and dismantling charges. If the equipment will do the
job the economic advantage over new equipment is obvious. Even
with leased equipment, the agency can usually obtain it at a substantial
discount from the new price. Since the General Services Administra-
tion could charge rentals as long as the equipment is in use (and would
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AUATIC DATA have to until it is amortized), the incentive .to use older, perhaps out-
moded, equipment is lost. The General Services Administration may
then find itself eventually in the position of having a large inventor
of unused equipment in warehouses or directing agencies to use this
equipment oven though newer, more efficient equipment is available
at equal or lower cost. For the above reasons, the Department of
Defense does not consider the establishment of a revolving fund for
acquisition of all ADPE as desirable.
The views of this Department with respect to ADPE in the hands
of Government contractors have been made known to the Bureau of
the Budget, the General Accounting Office, and to various committees
of Congress. The General Accounting Office has issued a series of
reports on this matter, favoring Government ownership for ADPE
in Government contractor plants. Detailed comment. to the Comptrol-
ler General on his recommendations in this area were supplied to him
on May 21,1964, a copy of which is attached.
Department of Defense procurement policy is to place maximum
responsibility on contractors for contract performance, including the
responsibility for facilities acquisition to perform those contracts.
This would include ADPE. The Department's policies of contractor
responsibility go hand in hand with increased emphasis on the use of
filed price contracts and contracts with wide-ranging incentives which
are designed to insure the utmost in sound contract management by
Government contractors. Acceptance of a principle which would
provide all ADPE to contractors as Government-furnished equip-
ment carries with it substantial penalty because (1) it represents in-
creased Government control and intervention in private enterprise
and management initiative; (2) it poses the extreme likelihood of the
creation of a substantial inventory of idle ADPE; (3) the adminis-
tration and caretaking of such an equipment inventory will be ex-
tremely costly; and 4) it overlooks the alternative that the contractor
can purchase ADPE in many cases with better advantages to the
Government.
It has been stated that a principal advantage of centralized procure-
ment of ADPE is that lease/purchase decisions could be made on the
basis of the total Government requirement for the equipment over its
useful lifespan rather than on the basis of estimated use by the acquir-
ing organization. The Department of Defense position, based upon
extensive experience with this type of equipment, is that it is practi-
cally impossible for a single agency to determine potential secondary
users within the agency at the time of initial acquisition and that it
is completely unrealistic to assume that any agency can make such
determinations for the Government as a whole. We are in full support
of the objectives of purchasing computers on the basis of proven eco-
nomic advantage over leasing for the known application of the equip-
ment. Lease/purchase analysis is made when the equipment is ac-
quired and continually thereafter if the equipment is leased to assure
that changed situations have not altered the original decision. The
Department now purchases in all cases where the economic advantage
is proven, based upon the known use of the equipment and if the
funds are available. The equipment is then assured of full amortiza-
tion by the initial requiring agency and, as previously mentioned? re-
utilization of the equipment by a secondary user is helped by an ability
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AUTOMATI A "I
to transfer the equipment at no cost. This procedure allows selected
purchase of equipment where economy is assured and facilitates its
reutilization, but at the same time prevents a costly buildup of owned
equipment which may or may not have further use to the Government.
In view of the foregoing, it is recommended that in line 8, page 1 of
the bill, the words "and provide for" be deleted; in line 4, page 2, the
word "shall" be thanked to "may"; in line 7, page 2, the words "and
directed" be deleted; in line 12, page 2, the word "require" be changed
to "provide for"; and in lines 13, 14, and 15, page 3, the words "for
the efficient coordination, operation, utilization of such equipment by
and for the Federal agencies" be deleted and substitute in lieu thereof
the words "to establish and operate equipment pools and data process-
ing centers by or for the use of two or more Federal agencies or to
finance at the request of a Federal agency the acquisition and utiliza-
tion of such equipment."
The chairman of the Subcommittee on Government Activities in his
statement on the floor of the House of Representatives on February 11,
1965 (p. 2586, Congressional Record), at the time H.R. 4845 was intro-
duced, stated that the bill contained exceptions necessary for reasons
of security and defense and that it was not intended that the legislation
cover any specialized scientific or specially designed military APD
system components.
Virtually all specially designed ADPE developed for military pur-
poses such as weapons fire control, tactical military field operations,
scientific and engineering, missile and satellite tracking, weapons
development, command and control, and communications operations
are procured as integral parts of weapons and support systems. It
should be further noted that commercial general purpose equipment
is selected for these systems when it can perform satisfactorily. Selec-
tion of specific equipment, however, must always be related to the
total system and its interface requirements. The Department of
Defense also makes extensive use of ADPE for intelligence and other
highly classified purposes. Information essential to the selection and
acquisition of this equipment is highly classified and its dissemination
restricted accordingly. Certain agencies of the Department of De-
fense make extensive use of ADPE in accomplishing urgent cryptologic
missions. Design or selection, production, testing, and updating of
ADP equipment and the urgency and sensitive classified nature of the
data to which the ADP applications are made require that the most
rigid security measures and time schedules be applied. It is con-
sidered essential that determinations with respect to ADPE of the
types described above involving the national defense and national
security be made by the Secretary of Defense. Accordingly, the fol-
lowing additional amendment is recommended for incorporation in the
bill commencing on page 2, line 16:
"This section shall not be construed to apply to specially designed
automatic data processing equipment for scientific, military or
cryptologic uses and the head of a Federal agency is authorized to
determine when any automatic data processing equipment should be
excluded from the provisions of this section for reasons of national
defense or national security."
In conclusion, the Department of Defense supports the enactment
of H.R. 4845 if it is amended to include the suggestions set forth
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above. It concurs in those provisions of ILR. 4845 perta.inin to re-
sponsibilities to be vested in the Secretary of Commerce. The Deppart-
ment of Defense is engaged in extensive scientific research and devel
opment activities in the ADPE field primarily with respect to our
military requirements. However, it believes that there is a definite
requirement on a Government-wide basis for the type of services
which the Secretary of Commerce would provide under this bill. It
is understood that the authority vested in the Secretary of Commerce
by subsection 111(f) is not intended to curtail or restrict Department
of Defense research and development activities in this field.
We will be happy to provide any further information that your
committee may request. Further, the Department welcomes the op-
portunity to testify at hearings to be held on H.R. 4845.
The Bureau of the Budget advises that. from the standpoint of the
administration's program, there is no objection to the submission of
this report to the committee.
Sincerely,
IIon. WILLIAM L. DAWSON,
CYRus R. VnxcE.
Deputy Secretary of Defense.
OFFICE OF TIIE POSTMASTER GENERAL,
lt'ashingtan, D.C., March 29,1965.
Ch-airr,zan. Committee an Government Operations,
House of Representatives, Washington, D.C.
l)EAn Mir. Cii.arnzi.x-i: This is in reply to your rcgnest for it report
on II.R. 4815, to provide for the economic and efficient purchase, lease,
niaintenfuice, operation, and utilization of automatic data processing
equipment. by Federal departments and agencies.
The. Post Office Department is already accomplishing many of the
purposes of this legislation. During the past year, ADP activities of
our 15 reggional offices have been consolidated into 6 data processing
centers, which resulted in an increased utilization of equipment, and
an estimated cost reduction of over 13 million a year.
We have actively participated in the Bureau of the Budget's experi-
mental ADP sharing program in Philadelphia, where a member of
the Department's regional office staff served as chairman of the re-
gional sharing program. Since the completion of this experiment
we have taken advantage, as far as possible, of equipment sharing
opportunities.
In 1961, for example, the Department. arranged to use the Treasury
f department's larger capacity computer for sorting employee earnings
records of a quarterly basis to meet Internal Revenue requirements.
This arrangement provided measurable time and financial advantage
to both Departments. Sharing has also been advantageous in the
audit of postal money orders. The Treasury Department now per-
forms the reconciliation function on a joint-use arrangement utiliz-
ing their equi ment. This is saving the. Post Office Department an
outlay of over $500,000 a year.
It is noted that section 111(b) (2) provides that the Administrator
of General Services may delegate to an agency authority to lease,
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purchase, or maintain individual ADP systems or specific units of
equipment when he determines such action to be necessary for econ-
omy and efficiency of operations. He may also delegate to an agency
authority to lease, purchase, or maintain ADP equipment "to the
extent to which he determines such action to be necessary and desir-
able to allow for the orderly implementation of a program for the
utilization of such equipment." With respect to these provisions, it
is our belief that management decisions as to when and where ADP will
be used are the prerogative of the agency concerned. More impor-
tantly, we believe that the General Services Administration does not
have the expertise to make judgments respecting complicated postal
operations, or the relationship of ADP equipment to such operations,
in terms of efficiency and economy.
Looking to the future, it is evident that ADP will become increas-
ingly important to us in our day-to-day operations in various phases
of the handling and transportation of mail as well as in the manage-
ment. Through the use of a comprehensive data-gathering net-
work, we anticipate that sectional center workload forecasts will in
time be provided for use by postal managers in planning more pre-
cisely transportation and manpower requirements. Air and surface
transportation schemes are in the process of being developed auto-
matically with a view to optimizing transportation routings in terms
of time and cost. We have an experimental project presently under-
way which indicates the practicability of developing essential man-
agement information in such areas as production scheduling and work
measurement, with payroll data being obtained as a byproduct from
the overall process. Our research and development efforts involve
the use of ADP and related equipment as control components for
mail processing transport equipment.
We are actively studying and testing a variety of new applications
of ADP involving mail processing operations on workroom floors.
Until these applications have been designed, developed, tested, and
proved, the kind of equipment needed, the number of installations,
and the location of equipment cannot be determined. Here, as in
the other areas outlined above, the expertise of postal engineers is
required for efficient procurement, operation, and maintenance of
ADP equipment.
Computer technology, as we know it today, is advancing at a rapid
rate, and it is reported that computer equipment becomes obsolete in
40 months or less. With this in mind, and with the General Services
Administration passing on our requests for ADP, it can reasonably
be assumed that delay will necessarily result in the acquisition and
cause increase in procurement leadtime. Such delay can be lengthy
and result in reducing the value of the equipment being acquired.
The Department agrees with the general design of the legislation
to achieve a program of greater economy and increased effectiveness
in the use of ADP equipment. The proposed sharing arrangements
in the utilization of such ADP equipment, as recommended by the
President, we believe will contribute greatly in meeting Government-
wide ADP requirements at minimum cost, and help to establish com-
mendable guidelines in ADP administration-management activities.
We are mindful, however, that the Post Office Department must op-
erate within a framework of responsibility requiring a day-to-day
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method of operation, which in many respects differs from other agen-
cies, and requires different operational procedures. It is hoped, there-
fore, that while we are in accord with the overall Federal policy in-
tended, restrictive requirements will not be employed which would
hamper or delay our normal activities.
In this connection we feel clarification should be made as to sub-
section (b) of the legislation which authorizes the General Services
Administrator to make determinations and to require transfers and
joint utilizations of ADP equipment by the agencies. The extent of
this authority is not clear when read with the language of subsection
(g) of the bill which restricts the authority of the General Services
Administration where it impairs or interferes with agency deter-
minations.
The Bureau of the Budget has advised that from the standpoint of
the administration's program there is no objection to the submission of
this report to the committee.
Sincerely yours,
JOHN A. GRoNotisKI.
Postmaster General.
DEPARTMENT of AGRICULTURE,
Washington, D.C., March 15, 1965.
IIon. INTILLLvia L. DAWSON,
('kairman, Committee on Government Operations,
House of Representatives.
DEAR MR. CHAIRMAN: This is in reply to your request of February
19, 1965, for a report on B.P. 4845, a bill to provide for the economic
and efficient purchase, lease, maintenance, operation, and utilization
of automatic data processing equipment by Federal departments and
agencies.
In the Department of Agriculture significant improvements have
been made in our program operations by using automatic data process-
ing equipment. We feel that. the Department's policies in the acquisi-
tion and use of automatic data processing equipment. are in accordance
with the objectives of B.P. 4845. We have computers of four manu-
facturers installed or on order. Three departmental data processing
centers are now using large computers. Digital and analog computers
are used as research tools in our laboratories. Small and medium com-
puters are used where the workload warrants. A Department staff
provides overall leadership and coordination of Department-wide
activities pertaining to the management and use of automatic data
processing equi ment.
Section 111(g) of the. proposed legislation relates specifically to the
relationship of the General Services Administration to the agencies
and other users of automatic data processing equipment. The report
on the management of automatic data processing in the. Federal Gov-
ernment, which was transmitted by the President to the Congress on
March 2, 1965, contained the following recommendation :
"In summary, we have concluded that the establishment of a separate
office empowered with authority and responsibility to make decisions
on the procurement and utilization of APP equipment would dilute
the responsibility of agency heads for the management of their orga-
nizations, that it. would serve to divorce ADP management from the
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AUTOMATIC DATA PROCESSING EQUIPMENT
established arrangements for Presidential surveillance over the overall
management of the executive branch, and that it would interfere with
direct Government agency-contractor relationships unnecessarily."
We feel that this affirmative statement of policy clarifies the intent
of this section.
The Bureau of the Budget issued Circular No. A-71 on March 6,
1965, assigning appropriate responsiiblity for the administration and
management of automatic data processing activities to the Bureau of
the Budget General Services Administration, Department of Com-
merce, Civil Service Commission, and to the heads of executive agen-
cies. This specific assignment of responsibilities to executive agencies
should facilitate the efficient and economical management of ADP
activities.
We believe that H.R. 4845 will facilitate our efforts to achieve fur-
ther economies, particularly by the additional services to be available
from the Bureau of the Budget, the General Service Administration,
and the Department of Commerce and the provisions for the automatic
data processing fund for the procurement of automatic data processing
equipment. Accordingly, the Department of Agriculture recommends
that your committee give favorable consideration to H.R. 4845.
The Bureau of the Budget advises that there is no objection to the
presentation of this report from the standpoint of the administration's
program.
Sincerely yours,
ORVILLE L. FREEMAN,
Secretary.
THE GENERAL COUNSEL OF THE TREASURY,
Hon. WILLIAM L. DAwsoN,
Washington, D.C., March 12,1965.
Chairman, Committee on Government Operations,
House of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN : Reference is made to your request for the
views of this Department on H.R. 4845, to provide for the economic
and efficient purchase, lease, maintenance, operation, and utilization of
automatic data processing equipment by Federal departments and
agencies.
The proposed legislation would authorize the Administrator of the
General Services Administration to coordinate and provide for pur-
chase, lease, maintenance, and transfer of automatic data processing
equipment; to require joint utilization of such equipment; to establish
and operate equipment pools and data processing centers; and to dele-
gate such authority to other Federal agencies. It would also provide
for establishment of automatic data processing funds, authorize the
Secretary of Commerce to provide scientific and technological advice
on and to recommend standards for automatic data processing, and
place certain limits on the authority of the Administrator and secre-
tary in carrying out its provisions.
The Treasury Department supports the underlying objectives of the
proposed legislation. While much can be accomplished in the economic
and.efficient use of automatic data processing equipment and tech-
niques within the framework of existing legislation, regulations, and
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54 AUTOMATIC DATA PROCESSING EQUIPMENT
administrative arrangements, there may be certain advantages to be
gained in the enactment of legislation dealing with this significant, and
relatively new, management resource.
Some portions of the proposed legislation, however, may need clari-
fication. II.R. 4845 would add to the Federal Property and Adminis-
trative Services Act of 1949, as amended, a new section 111 of which
subsection (b) (1) states in part that. "Automatic data processing
equipment. suitable for * * * use by Federal agencies shall be pro-
vided by the Administrator through * * * transfer of equipment
from other Federal agencies * * *." The Department interprets this
provision to mean that equipment so transferred would have first been
declared excess by the using agency and thereby preclude possible
interference with the ability of the using agency to carry out its pro-
gram responsibilities.
Subsection (b) (1) would also provide that the Administrator is
authorized "to require joint utilization of such equipment by two or
more Federal agencies." This provision is in apparent conflict with
the provision of subsection (g) of section 111 which would provide that.
"Authority so conferred upon the Administrator shall not be so con-
strued as to impair or interfere with the determination by agencies and
other users of their individual automatic data processing equipment
re uirements." [Italic supplied.]
Thos Department. suggests that, the language "to facilitate joint utili-
zation" would be preferable and would preclude a possible misinterpre-
tation leading to interference with an agency's responsibility to give
priority to its assigned programs.
Subsection (b) (2) of section 111 would provide that "the Adininis-
trator may delegate to one or more Federal agencies authority to oper-
ate automatic data processing equipment- pools and automatic data
processing centers * * *." The Department considers that it is the
intent of this provision to enable establishment of such pools and cen-
ters for use by two or more agencies under conditions not heretofore
authorized by law.
The Department further believes that subsection (b) (2) of section
lii, along with the provision in the last. sentence in subsection (e),
should not be so construed as to preclude the operation by the head of
an agency of pools or centers now in existence or to be established
within an agency under existing or future law. A contrary construc-
tion would seem to be inconsistent with that part of subsection (g)
which provides "the Administrator shall not interfere with, or attempt
to control in any way, the use made of automatic data processing equip-
ment. or components thereof by any agency or user."
Subsection (b) (2) would also provide that the "Administrator may
delegate to one or more Federal agencies authority to * * * lease, pur-
chase, or maintain individual automatic data processing systems or
onditions. The De-
specific units of equipment * * *" under various conditions.'
partrnent, under present. practice, first attempts to acquire the auto-
inatie data processing equipment it has determined is needed, and for
which funds have been provided by law, either under the provisions
of Federal supply contracts the General Services Administration has
negotiated with commercial suppliers or from the excess equipment of
other Federal agencies, whichever is the most advantageous. Other
sources are not used unless either a contract is not already available
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for the equipment needed or the equipment available under existing
contracts can be obtained more economically by negotiating a sepa-
rate contract. Assuming that the provision cited above can be con-
strued to confirm this practice, the Department would have no objec-
tion.
Subsections (c) and (d) of section 111 would establish an "auto-
matic data processing fund, which shall be. available 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, operation, utilization
of such equipment by and for Federal agencies * * *."
The intent of this provision is not fully clear to the Department
which believes that the existing provisions of the Federal Property
and Administrative Services Act of 1949, as amended, already au-
thorizes a fund which the Administrator of General Services may use
to procure and maintain equipment for the use of executive agencies
in the proper discharge of their responsibilities.
It is assumed, however, that the proposed fund would additionally
provide for the funding of necessary automatic data processing centers
as proposed in subsections (b) (1) and (b) (2), discussed above, and,
further, could be used by agencies to finance the procurement of per-
sonal services, such as automatic data processing systems design and
programing services where existing authority is inadequate. The
Department would not object to this interpretation, provided that, the
provisions of subsection (e) notwithstanding, agencies would not be
precluded from using existing authorities to provide similar services.
The Treasury Department believes that subsection (f) would au-
thorize the expansion of the currently limited efforts of the Depart-
ment of Commerce in providing scientific and technological advisory
services and proposing standards in the automatic data processing
field. The Department believes that such an expansion of efforts is
needed and fully supports this provision.
The Department has been advised by the Bureau of the Budget that
there is no Objection from the standpoint of the administration's pro-
gram to the submission of this report to your committee.
Sincerely yours,
FRED B. SMITH,
Acting General Counsel.
GENERAL COUNSEL OF THE
DEPARTMENT OF COMMERCE,
Hon. JACK BROOKS, Washington, D.C., March $2,1965.
Chairman, Government Activities Subcommittee, Committee on Gov-
ernment Operations, Howe of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN : This letter is in reply to your request for the
views of this Department on H.R. 4845, a bill to provide for the eco-
nomic and efficient purchase, lease, maintenance, operation, and util-
ization of automatic data processing equipment by Federal depart-
ments and agencies.
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We are in accord with the objectives of the bill and believe most of
its provisions would be helpful in advancing the development, effec-
tive application, and economic use of automatic data processing
throughout the executie branch. In particular, we believe that sub-
section 111(c) of the bill authorizing the establishment of a revolving
fund for equipping and operating automatic data processing centers
to serve Federal agencies should enable some Federal agencies more
readily and economically to exploit computer technology in their
operations.
Subsection 111(f) recognizes important responsibilities in the De-
partment of Commerce. Under that subsection, the Secretary of Com-
merce would be authorized to provide Federal agencies with scientific
and technological advisory services related to automatic data process-
ing and related systems, to submit recommendations to the President
on uniform Federal automatic data processing standards, and to un-
dertake in connection with the above necessary research in the sciences
and technologies of computer and related systems.
The Department of Commerce is a pioneer in the development of
automatic data processing technology and systems and under existing
authority has provided an important part of the Federal research and
development in this area. While the Department's existing authority
is very broad, we think it is appropriate in any legislation on central
management of automatic data processing equipment, for specific func-
tions to be assigned to the Secretary of Commerce. Such an assign-
ment is desirable because it makes clear the relationshi between the
various agencies concerned with this very important subject. We do
not construe subsection 111(f) as limiting in any way this Depart-
ment's broad authority for scientific research.
The Bureau of the Budget's recent report on the management of
automatic data processing in the Federal Government, which the
President transmitted to the Congress on March 2,1965, recommended,
among other things :
"In order to improve the state of the art and to provide a source
of expertise to the Government agencies we recommend legislation
to provide specific authority and direction to the Secretary of Com-
merce to establish a centralized research center on computer science
and technology and to provide advisory and consultative services to
Government agencies on computer systems development and technical
problems."
Bureau of the Budget Circular No. A-71, issued March 6, 1965,
assigns responsibilities for the administration and management of
automatic data processing activities. The specific responsibilities of
the Department of Commerce under the circular are as follows :
`The Department of Commerce is responsible for aiding in the
achievement of increased cost effectiveness in the selection, ac-
quisition and utilization of automatic data processing equipment,
and in this connection will perform the following functions :
? (a) Provide advisory and consultative services to executive
agencies on the methods for developing information systems
based on the use of computers and the programing and languages
thereof.
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" (b) Undertake research on computer sciences and techniques,
including system design, oriented primarily toward Government
applications.
(c): Provide day-to-day guidance and monitorship of an
executive branch program for supporting the development, meas-
urement, and testing of voluntary commercial standards for
automatic data processing equipment, techniques, and computer
languages.
"(d) Improve compatibility in automatic data processing
equipment procured by the Federal Government by recommend-
ing uniform Federal standards for automatic data processing
equipment, techniques, and computer languages."
We believe the language of subsection 111(f) of the bill provides
adequate legislative recognition for these responsibilities.
Subsection 111(b) of the bill places certain central functions with
respect to ADP equipment in the Administrator of General Services
Administration. In the report President Johnson recently trans-
mitted to the Congress, the following conclusion was stated :
"We have concluded that the establishment of a separate office
empowered with authority and responsibility to make decisions on
the procurement and utilization of ADP equipment would dilute
the responsibility of agency heads for the management of their
organizations, that it would serve to divorce ADP management from
the established arrangements for Presidential surveillance over the
overall management of the executive branch, and that it would inter-
fere with direct Government agency-contractor relationships un-
necessarily."
Construing subsection 111(b) together with subsection 111(g), we
believe it is clear that the central role of GSA would be subject to
the direction and policy guidance of the President and the Bureau of
the Budget in accordance with the report the President recently
transmitted to the Congress and that the agencies would determine
their own needs for ADP equipment. Subsections 111 (b) and 111(g)
could be considered ambiguous, however, with respect to who shall
make the final determination concerning the kinds of specifications
of ADP equipment needed to meet stated agency requirements effec-
tively and economically.
Agency heads are charged with the responsibility for the proper
and efficient conduct of their programs and need to have authority
commensurate with this responsibility. This is particularly im-
portant when it relates to decisions about the kinds of ADP equip-
ment needed to meet agency requirements. In many agencies ADP
equipment has become a major resource on which program operations
and the management strutcures of those agencies are vitally depen-
dent. It is not practicable to expect the Administrator of the General
Services Administration to make or review decisions about agency
ADP equipment needs that necessarily involve agency program and
management judgments. Consistent with this understanding, we
construe subsection 111(g) as a limitation on the authority of the
Administrator and as leaving to each agency the final determination
with respect to the kinds or specifications of ADP equipment needed
for meeting the agency requirements effectively and economically.
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Subject to these understanding-, the Department would favor enact-
ment of H.R. 4845.
We have been advised by the Bureau of the Budget that there
would be no objection to the submission of this report from the stand-
point of the administration's program.
Sincerely,
RoBEET E. Gu Es,
General Counsel.
l)zi?ARTJ s T OF HEALTH, EDLrcATioN, AND WELFARE,
ill arch. 25,1965.
Ifon. Wn i i Alf L. DAWSON,
Chairman, Committee on Government Operations,
Eloise of Representatives, TVashington,.D.C.
DEAR MR. Ci-LURM AN : This letter is in response to your request of
February 19, 1965, for a report on H.R. 4845, a bill "to provide for the
economic and efficient purchase, lease, maintenance, operation, and
utilization of automatic data processing equipment by Federal depart-
ments and agencies."
The bill would provide for the Administrator of General Services
to coordinate and control the purchase, lease, and maintenance of
automatic data processing equipment by, or at the expense of, Federal
agencies. It would also establish an automatic data processing fund
on, the books of the Treasury for the payment of costs incident to
management of such equipment.
We are in general agreement with the provisions of this bill. We
slaecifically approve of the provisions reserving the right of the exeru-
tive department, and agencies to establish their own requirements.
The agency responsible for the administration of operating programs
must have the authority to select the equipment it needs in order to
carry out its programs and it should not be restricted in its utilization
of equipment. We believe that section 111(g) of the bill contains
adequate safeguards to permit effective and efficient administration of
agency programs without undue interference.
We believe the establishment of a central data processing fund to fi-
nance the acquisition and maintenance of automatic data processing
equipment will permit more economical decisions as to whether equip-
ment should be leased or purchased. Under present circumstances, an
agency must lease the equipment even though longrun savings would
result from purchase only because budget funds are not available.
The central data processing fund will permit immediate purchase if
all other factors indicate it would he more economical to do so.
In simimary. we approve of the bill so long as the bill clearly reserves
to the executive departments and agencies the right to determine their
own requirements.
We are advised by the Bureau of the Budget that there is no ob-
jection to the presentation of this report. from the standpoint of the
administration's program.
Sincerely,
W va J. Oonax,
Aaaisttynt Seore ary.
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Hon. WILLIAM L. DAWSON,
House of Representatives.
DEPARTMENT OF STATE,
Washington, D.C., March 12, 1965.
DEAR MR. CHAIRMAN : The Department of State appreciates the
opportunity to comment on the bill, H.R. 4845, "to provide for the
economic and efficient purchase, lease, maintenance, operation, and
utilization of automatic data processing equipment by Federal depart-
nients and agencies."
The Department's view of the proposed legislation is that it is con-
sistent with the report to the President on "The Management of Auto-
matic Data Processing in the Federal Government," which was ap-
proved by the President and submitted to the Congress on March 2,
1965; and that administration of the bill would be in accordance with
the provisions of Bureau of the Budget Circular No. A-71, March 6,
1965, on the subject of responsibilities for the administration and
management of automatic data processing activities.
The Department is pleased to observe that the bill does not place in
another agency any management authority necessary to the successful
attainment of its plans for extending the use of data processing sys-
tems which are designed to cope with continuing workload increases
without corresponding increases in personnel.
The Bureau of the Budget advises that from the standpoint of the
administration's program there is no objection to the submission of
these comments.
Sincerely yours,
DOUGLAS MA.cARTHUR II,
Assistant Secretary for Congressional Relations
(For the Secretary of State).
DEPARTMENT OF THE INTERIOR,
OFFICE OF THE SECRETARY,
.Hon. WILLIAM L. DAWSON, Washington, D.C., March 22,1965.
Chairman, Committee on Government Operations,
House of Representatives, Washington,D.C.
DEAR MR. DAWSON : This responds to your request for the views of
this Department on 11.11. 4845, a bill "To provide for the economic
and efficient purchase, lease, maintenance, operation and utilization
of automatic data-processing equipment by Federal departments and
agencies."
We recommend enactment of the bill.
The bill reflects the recommendations made in the report entitled
"The Management of Automatic Data Processing in the Federal Gov-
ernment," which was transmitted to the Congress by the President on
March 2, 1965. We concur, therefore, with the report on H.R. 4845
made to your committee by the Bureau of the Budget, which was sent
to you on March 11, 1965.
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The Bureau of the Budget has advised that there is no objection to
the Presentation of this report from the- standpoint of the administra-
tion s program.
Sincerely yours,
GEORGE E. I OBINSON1
Deputy Assistant Secretary of the Interior.
DrP.\RTMF. T OF LABOR,
Washington, May 7, 1965.
lion. ' ILI.IAML.DAWSON,
Chairman. Committee on Government Operations,
House of Representatives, Wasli;ington, D.C.
Da..uii MR. CIrAIR,rAN: This is in response to your request for our
views on II.R.. 4845, a bill to provide for the economic and efficient
purchase, lease, maintenance, operation, and utilization of automatic
data processing equipment by Federal departments and agencies.
Shortly after receiving II.fi, 4815 for comment, we received Bureau
of the Budget Circular No. A-71, entitled "Res onsibilities for the
Administration and Management. of Automatic Data Processing Ac-
tivities." This circular establishes a Government: wide program for
the coordination of ADP activities carried on by the Federal Govern-
ment.. It. clearly prescribes the responsibilities of the Bureau of the
Budget., the General Services Administration, and other agencies with
regard to ADP administration and operations.
It appears that Circular No. A-71 accomplishes the objectives of
II.R. 4815 and, accordingly, enactment of this measure seems to be
unnecessary at this time. However, we would have no objection to its
enactment if the Congress considers it advisable.
The Bureau of the Budget advises that there is no objection to the
submission of this report from the standpoint of the administration's
program.
Sincerely,
IV. 'rI,I.Arn niTZ,
Secretary of Labor.
VETERANS' ADMINISTRATION,
OFFICE OF TIIE ADMINISTRATOR OF VETERANS' AFFAuss,
Washington, D.C., March 23,1364.
Ilon. JACK BROOKS,
Chairman, Government Activities Subcommittee, Committee on Gov-
ernment Operations, House of Representatives, Washington, D.C.
DEAR MR. CITAIRirAx: This refers to your request for a report by
the Veterans' Administration on II.R. 4845, 89th Congress, a bill "To
provide for the economic and efficient purchase, lease, maintenance,
operation, and utilization of automatic data processing equipment by
Federal departments and agencies."
H.R. 4845 would amend the Federal Property and Administrative
Services Act of 1949 to authorize the Administrator of the. General
Services Administration to coordinate and provide for the economic
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AUTOMATIC DATA PROCESSING EQUIPMENT 61
and efficient purchase, lease, and maintenance of automatic data process-
ing equipment by Federal agencies. As part of his responsibility, he
would be authorized to transer such equipment between Federal agen-
cies, to require joint utilization of the equipment, and to establish and
operate equipment pools and data processing centers.
An automatic data processing fund would be established for the
procurement and maintenance or repair of ADP equipment. Provi-
sion is made for appropriations to such fund and for the crediting of
advances and reimbursements from available appropriations and
funds of other agencies, organizations, or contractors utilizing the
equipment.
This bill would also authorize the Secretary of Commerce to provide
agencies with scientific and technological advisory services relating to
automatic data processing, to make recommendations to the President
relating to the establishment of uniform Federal standards, and to
conduct research in connection with this new form of science or tech-
nology. The bill also provides that the authority conferred upon the
Administrator of the General Services Administration shall not be
construed as to impair or interfere with determinations by agencies
concerning their individual ADP requirements nor shall he interfere
with, or attempt to control, the use of such equipment by agencies.
We in the Veterans' Administration are very much aware of the
significant role that automatic data processing equipment and related
systems have played in increasing effectiveness and improving produc
tivity in Government operations. We have made a most determined
effort to integrate the tools of data processing with the services we are
responsible for providing and have made them an integral part of our
major program operations. As a result, decisions concerning the pro-
curement of this type of equipment, and the manner in which it is to
be used, are directly related to the success or failure of such programs.
Flexibility and discretion in making these decisions are absolutely
necessary for the effective administration of the programs involved.
During the past few years the Executive Office of the President, and
the General Services Administration, have issued a series of bulletins
and circulars which prescribe methods of selection, acquisition, and
use of automatic data processing equipment.
(a) Bureau of the Budget Bulletin 60-6, March 1960, prescribed
guidelines for studying the feasibility of using ADP equipment.
(b) Bureau of the Budget Circular A-54, October 1961, provided
guidelines for selecting equipment and deciding whether to purchase
or lease.
(e) Bureau of the Budget Circular A-55, November 1963, is the
basis for an annual inventory of ADP equipment use, costs, personnel,
and applications.
(d) Bureau of the Budget Circular A-61, August 1963, is an aid for
agencies to assess their ADP programs.
(e) Bureau of the Budget Circular A-27, June 1964, creates ADP
sharing exchanges in the major cities of the country.
(f) GSA Regulation No. 36, April 1964, deals with the rouse or dis-
position of equipment which exceeds a user's needs.
The Veterans' Administration has complied with all of these direc-
tives and the desired economies have been achieved. We have pur-
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62 AUTOMATIC DATA PROCESSING EQUIPMENT
chased all of our 13 computers. Utilization of our major systems is
extremely high; for example, the two large 7080 systems were utilized
1,443 hours out of a possible 1,488 hours (97 percent) in January 19(ti.
We are articipating fully in the GSA sharing exchange program
both in Washington and throughout the country. (For further facts,
see enclosure.)
We are, of course, aware of the report to the President on the man-
agement of automatic data processing in the Federal Government,
which has )just been completed by the Bureau of the Budget and was
transmitted to the Conks on March 2, 1965. That report took the
position that the existing organizational arrangements with respect
to automatic data processing in the Federal Government are basically
sound. Such report, however, indicated a need to strengthen the
resources devoted to the management of ADP. General legislation
was therefore recommended which would (1 provide an expression
of congressional policy on the acquisition and use of automatic data
processing equipment; and (2) give a specific directive to the Bureau
of the Budget and the General Services Administration, within the
areas of their presently assigned responsibilities, to take necessary ac-
tions to assure the most economic and effective use of automatic data
processing. In addition, a specific legislation was recommended (1)
to provide for the establishment of a revolving fund to facilitate the
establishment of service centers, equipment pools, and time-sharing ar-
rangements; (2) to develop, measure, test, and make provisions for the
approval and implementation of Federal standards for ADP et(iiip-
ment and techniques; and (3) to provide specific authority and direc-
tion to the Secretary of Commerce to establish a centralized research
center on computer sciences and technology, and to rovide advisory
and consultative services on computer systems development and re-
lated scientific and technical problems. We note. that certain of these
recommendations have been incorporated _n II.R. 4845.
Although this bill would give broad authority to the Administrator
of the General Services Administration to coordinate the procurement
and utilization of ADP equipment, by Federal agencies (including au-
thority to transfer such equipment. between Federal agencies or to re-
quiro its joint utilization), such authority is tempered by the provision
that it should not be construed as to impair or interfere with determi-
nations by agencies concerning their individual APP requirements,
nor interfere with, or attempt to control, the use of such equipment by
agencies. Moreover, we note that the President has approved the rec-
ommendations contained in the Bureau of the Budget study of the
management of automatic data processing, and we further note the
statement of the Bureau of the Budget in its report of March 11, 1965,
to your committee that the legislation proposed will assist in carrying
them out.
Tinder the circumstances set forth above, we would have no objection
to the favorable consideration of H.R. 4845 by your committee.
We are advised by the Bureau of the ButIget that there is no ob-
icction from the standpohnt of the administration's program to the
presentation of this report to your committee.
Sincerely, W. J. DRivEit, Administrator.
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AUTOMATIC DATA PROCESSING EQUIPMENT
Annual savings derived from purchase of ADP equipment, calculations based on
January 1965 use
Location
Type system
(IBM)
Date of purchase
Purchase
price, net
Amortization
completed date I
Annual
savings 2
Philadelphia data proc-
1401_____________
June 1962_______
$244,000
June 1964 --------
$125,000
essing center.
1401_____________
November 1962_
289,000
November 1964-
149,000
7080(80K)_-_____
----- do-----------
2,073,000
August 1965 -----
772,000
Additional 80K
June 19G4 --------
397,000
August 1967_..___
128,000
for 7080.
1903_____________
December 1985_
22,000
February 1969_-_
7,000
Hines data processing con-
1401 -------------
June 1962 --------
235,000
September 1964_
107, 000
ter.
1401_ __
July 1963 --------
205,000
September 1065_
98,000
7080(80K)__-_ _
June 1962 --------
2,109,000
December 1964..
866,000
Additional 80K
September 1984_
301,000
June 1967 --------
143, 000
for 7080.
1903_____________
July 1965 --------
22,000
September 1968_
7,000
St. Paul data processing
1401_____________
November 1962-
384,000
June 1965 --------
149,000
center.
1401_____________
July 1963 --------
288,000
December 1965__
119,000
1404 printer
April 1964 -------
86,000
June 1967 --------
27,000
added.
Los Angeles data process-
1401_____________
-July 1063 --------
172,000
April 1067 -------
46,000
ing center.
Washington data process-
1401_____________
July 1063 --------
235,000
October 1965 ....
107,000
ing center.
Additional
May 1964-------
66,000
August 1967_
30,000
memory: 2
features.
2 tape drives.___
October 1964____
44,000
May 1969 -------
10,000
Hines Veterans' Adminis-
1620 ---------------
----- do-----------
59,000
December 1967._
18,500
tration hospital.
l
k
'
Litt
e Roc
Veterans
Ad-
1620_____________
----- do-----------
55,000
September 1967-
19,000
ministration hospital.
Omaha Veterans' Admin-
1620_____________
October 1961 ....
55,000
November 1965.
13,500
istration hospital.
1622_____________
March 1994 ------
18,000
July 1967 --------
5,500
Total costs and esti-
-
7,449,000
-
2,946
500
mated annual sav-
,
ings.
1 Amortization completion date determined by dividing the purchase price by the annual savings.
2 Annual savings derived by estimating the rental charges if the equipment were not purchased and
subtracting the annual maintenance costs from the result. Estimates of annual rental costs are based on
current utilization of the equipment.
ATOMIC ENERGY COMMISSION,
Hon. Washington, D.C., March 16,1965.
WILLIAM L. DAWSON,
Chairman, Committee on Government Operations,
House of Representatives, Washington, D.C.
DEAR MR. DAWSON : This is in reply to your request for the views of
the Atomic Energy Commission on H.R. 4845, a bill to provide for
the economic and efficient purchase, lease, maintenance operation, and
utilization of automatic data processing equipment by the Federal
departments and agencies.
As you are aware, President Johnson transmitted to the Congress on
March 2, 1965, a report on Federal policy and practices in the acquisi-
tion and utilization of electronic computers in Government. The
Atomic Energy Commission was represented on the Advisory Com-
mittee to the Bureau of the Budget and on the project staff with respect
to the study which resulted in this report to the Congress. We agree
with the objectives Of H.R. 4845 and believe that they are consistent
with the policies and recommendations for increased efficiency and
economy in the administration and management of automatic data
processing equipment outlined in this report. We feel, however, that
it would be desirable to clarify certain language presently appearing
in the bill. For example, section 111 (a) authorizes and directs the
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64 AUTOMATIC DATA PROCESSING EQUIPMENT
GSA Administrator to coordinate and provide for the economic and
efficient purchase, lease, and maintenance of automatic data processing
equipment. This authority could be interpreted so broadly as to in-
clude the selection and acquisition of equipment or it might be inter-
preted so narrowly to include only the negotiation of Federal Supply
Service contracts. We believe that the functions to be performed by
central agencies should involve primarily the issuance of policies,
procedures, and guidelines for use by the various departments and
agencies and that the presently recognized responsiblities of individual
departments and agencies in managing their own ADP resources
within such policies and guidelines should continue substantially
unchanged. Accordingly, the AEC believes that the GSA Adminis-
trator's responsibilities should be clearly defined and limited in the
manner we have suggested. Another source of concern to us is the
apparent absence in the bill of a clear statement of whether GSA or
individual agencies would have responsibility for budgeting and
financing the acquisition of ADP equipment.
We have been advised by the Bureau of the Budget that there is
no objection from the standpoint of the administration's program to
the transmittal of this letter.
Sincerely yours,
JOHN V. VINCIGITERRA
(For General Manager).
NATIONAL AERONAUTICS AND SPACE ADrnNIs RATION,
OFFICE OF THE ADMINISTRATOR,
Washington, D.C.,,Varch. 29,1965.
IIon. JACK BRooKs,
Chairman, Government Activities Subcommittee, Committee on Gov-
ernment Operations, House of Representatives, Washington,
D.C.
DEAR MR. CIIAIRMAN : This refers to your request for a report by
the National Aeronautics and Space Administration on H.R. 4845,
a bill to provide for the economic and efficient purchase, lease, main-
tenance, operation, and utilization of automatic data processing
equipment by Federal departments and agencies.
As we understand the legislation, it is designed to provide the
necessary executive authority and responsibility for the economical
and efficient acquisition and management of automatic data process-
ing equipment. It is primarily directed to the processing of admin-
istrative types of data, such as payrolls, inventories, and personnel
records. It would accomplish this by assigning certain general pow-
ers to the Administrator of the Genera[ Services Administration.
The National Aeronautics and Space Administration has studied
those provisions and feels that they are well designed to carry out
the purposes of the bill, particularly the provisions which would
establish a revolving fund for the acquisition and sharing of equip-
ment. In the area of administrative use we feel that the proposed
legislation presents no problem to this agency.
The National Aeronautics and Space Administration is a special-
ized user of certain highly technical automatic data processing
equipment. The newest and more complicated machines are made
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integral parts of space experiments. The management of research
automatic data processing equipment, particularly as it applies
to space exploration, is highly sophisticated and must remain ex-
clusively in the experimenting agency.
We feel that the bill adequately protects the research agencies in
that it not only provides that the Administrator's powers are not
to be construed to impair or interfere with the determination by
agencies and other users of their automatic data processing equip-
ment requirements, it affirmatively permits the Administrator to
delegate to Federal agencies authority to maintain individual auto-
matic data processing systems when that action is necessary for the
economy and efficiency of operations, the national defense or security,
or for the orderly implementation of overall programs for the utiliza-
tion of such equipment.
Additionally we note with approval that the bill authorizes the
Secretary of &mmerce to provide scientific and technological ad-
visory services relating to automatic data processing matters and
to recommend to the President uniform Federal standards in that
field.
For the foregoing reasons, the National Aeronautics and Space
Administration recommends that the bill, H.R. 4845, be favorably
considered.
The Bureau of the Budget has advised that, from the viewpoint
of the program of the President, there is no objection to the sub-
mission of this report to the Congress.
Sincerely yours,
RICHARD L. CALLAGHAN,
Assistant Administrator for Legislatire A fairs.
1-1011. WILLIAM L. DAWSON,
FEDERAL AVIATION AGENCY,
OFFICE OF THE ADMINISTRATOR,
Washington, D.C., March 15,1965.
Chairman, Committee on Government Operations,
House of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN : This is in response to your letter of Febru-
ary 19, 1965, and to Subcommittee Chairman Brooks' letter of
February 26, 1965, requesting our views on H.R. 4845, a bill to
provide for the economic and efficient purchase, lease, maintenance,
operation, and utilization of automatic data processing equipment by
Federal departments and agencies.
We are in agreement with the general objectives of the proposed
bill insofar as they would provide for the economic and efficient
acquisition and utilization of Government automatic data processing
equipment. The challenge will be in attaining the objectives without
undermining the responsibilities of the individual agencies for their
operations and the application of automatic data processing thereto.
The FAA is at the present time installing an automated air traffic
control system utilizing computer systems. Those systems have at-
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tached to them specially designed equipment to work in conjunction
with the computers. This highly specialized equipment 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.. It is essential that we retain effective
control over the design, installation, maintenance and utilization of
these and other specialized systems used in our technical operations.
They cannot be available for joint use with other agencies. To trans-
fer our control of these systems to GSA would seriously hamper our
efforts to carry out. our air safety responsibilities. It would further
be uneconomic as it. would require a staff at GSA matching the size
and technical competence of the staff already operating at FAA. We
ex ect therefore that full responsibility for these specialized systems
will be delegated to FAA if II.R. 4845 is enacted.
I appreciate Chairman Brooks' invitation to testify at the March
23 hearing to be held by the Government Operations Subcommittee.
I ain advised that the Bureau of the Budget intends to arrange pres-
entation of the views of the executive branch at that hearing and I
do not see anything I could add to that presentation other than what
have been stated in this letter.
The Bureau of the Budget has advised that there is no objection
from the standpoint of the administration's program to the sub-
mission of this report to your committee.
Sincerely,
X. E. IIALA;Y, Administrator.
CENTRAL INTELLIGENCE AOENCY,
OFricE OF DEPUTY DIREGfOR OF CENTRAL INTELLIGENCE,
Hon. W=Air L. DAWSON,
3Vashington, D.C., April 8,1965.
Chairman, Committee on Government Operations,
House of Representatives, Washington, D.C.
DEAR MR. CIIAmMAN : We wish to submit the views of this Agency
on H.R. 4845, 89th Congress, a bill to provide for the economic and
efficient purchase, lease, maintenance, operation, and utilization of
automatic data processing equipment by Federal departments and
agencies.
We endorse II.R. 4845's objective to achieve economic and effective
use of automatic data processing equipment. Guidance, support, and
standardization are extremely important goals in the automatic data
processing field. Further, we appreciate the problem of drafting such
legislation to assure that the authorities and responsibilities are suf-
ficient to the task, without impairing the effectiveness of Federal
agencies.
As is the case with many other agencies, the Central Intelligence
Agency regards automatic data processing equipment as an invaluable
and indispensable aid in the performance of its responsibilities. Such
equipment has enhanced our capability to coordinate, correlate, and
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evaluate the vital and complicated security data and intelligence in-
formation which we are receiving in ever-increasing quantities.
CIA uses both specialized and general commercial equipment in its
automatic data processing program. In both cases, however, utiliza-
tion is inextricably involved in the security responsibilities of the Di-
rector of Central Intelligence.
For your information, the National Security Act of 1947, as
amended, provides, in part, as follows :
"* * *, That the Director of Central Intelligence shall be responsible
for protecting intelligence sources and methods from unauthorized dis-
closure; * * *" (50 U.S.C. 401).
Although we wholeheartedly support the basic objective of the bill,
compliance by the Director of Central Intelligence with the full scope
of the authorities and responsibilities of the Administrator, GSA,
raises a serious question of conflict with the Director's statutory re-
sponsibility to protect intelligence sources and methods and data relat-
ino to the organization of this Agency.
re are informed that there is no intent to subordinate the security
responsibilities of the Director of Central Intelligence to the provisions
of the bill. This was also indicated in the hearings and floor discussion
on H.R. 5171, a similar bill introduced in the 88th Congress, where we
find numerous references to intelligence as an example of the type of
activities the Administrator would or should exempt from the pro-
visions of the proposed law.
While H.R. 4845 provides the Administrator with similar authority
to grant exceptions from the full scope of the bill, we feel that the po-
tential for statutory conflict on this matter warrants clarification in
the bill itself. Therefore, we recommend that there be added to the
sentences which ends on line 3, page 5, the following proviso :
": Provided, That where a head of a Federal agency determines that
compliance will require the disclosure of national security information
for which he has responsibility, pursuant to law, to protect from un-
authorized disclosure, the provisions of this section shall not apply."
We will be happy to provide any additional information that your
committee may request.
The Bureau of the Budget has advised, that from the standpoint
of the administration's program, there is no objection to the submission
of this report.
Faithfully yours,
MARSHALL S. CARTER,
Lieutenant General, U.S. Army, Deputy Director.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS
REPORTED
In compliance with clause 3 of rule XIII of the Rules of the House
of Representatives, changes in existing law made by the bill, as re-
ported, are shown as follows (new matter is printed in italic, existing
law in which no change is proposed is shown in roman) :
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TITLE I OF THE FEDERAL PROPERTY AND ADMINIS-
TRATIVE SERVICES ACT OF 1949, AS AMENDED
SEC. 101. (a) There is hereby established an agency in the execu-
tive branch of the Government which shall be known as the General
Services Administration.
(b) There shall be at the head of the General Services Administra-
tion an Administrator of General Services who shall be appointed
by the President by and with the advice and consent of the Senate and
perform his functions subject to the direction and control oi? the
President.
(c) There shall be in the General Services Administration a Deputy
Administrator of General Services who shall be a pointed by the Ad-
ministrator of General Services. The Deputy Administrator shall
perform such functions as the Administrator shall designate and shall
be Acting Administrator of General Services during the absence or
disability of the Administrator and, unless the President shall des-
ignate another officer of the Government, in the event of a vacancy
in the office of Administrator.
(d) Pending the first appointment of the Administrator under
the provisions of this section, his functions shall be performed tem-
porarily by such officer of the Government in office upon or immedi-
ately prior to the taking of effect of the provision of this Act as the
President shall designate, and such officer while so serving shall re-
ceive the salary fixed for the Administrator.
(e) Pending the effective date of other provisions of law fixing the
rates of compensation of the Administrator, the Deputy Administra-
tor and of the heads and assistant heads of the principal organizational
units of the General Services Administration, and taking into con-
sideration provisions of law governing the compensation of officers
having comparable responsibilities and duties, the President shall fix
for each of them a rate of compensation which he shall deem to be
commensurate with the responsibilities and duties of the respective
offices involved.
TRANSFER OF AFFAIRS OF BUREAU OF FEDERAL SUPPLY
SEc. 102. (a) The functions of (1) the Bureau of Federal Supply
in the Department of the Treasury, 2(2) the Director of the Bureau
of Federal Supply, (8) the _personnel of such Bureau, and (4) the
Secretary of the Treasury relating to the Bureau of Federal Supply,
are hereby transferred to the Administrator. The records, roperty,
personnel, obligations, and commitments of the Bureau ofFederal
Supply together with such additional records, property, and personnel
of the Department of the Treasury as the Director of the Bureau of
the Budget shall determine to relate primarily to functions trans-
ferred by this section or vested in the Administrator by titles IT, III,
and VI, of this Act, are hereby transferred to the General Services
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AUTOMATIC DATA PROCESSING EQUIPMENT 69
Administration. The Bureau of Federal Supply and the office of
Director of the Bureau of Federal Supply are hereby abolished.
(b The functions of the Director of Contract Settlement and of
the Office of Contract Settlement, transferred to the Secretary of the
Treasury by Reorganization Plan Numbered 1 of 1947, are transferred
to the Administrator and shall be performed by him or, subject to his
direction and control, by such officers and agencies of the General
Services Administration as he may designate. The Contract Settle-
ment Act Advisory Board created by section 5 of the Contract Settle-
ment Act of 1944 (58 Stat. G49) and the Appeal Board established
under section 13(d) of that Act are transferred from the Department
of the Treasury to the General Services Administration, but the func-
tions of these Boards shall be performed by them respectively, under
conditions and limitations prescribed by law. 1fhere shall also be
transferred to the General Services Administration such records, prop-
erty, personnel, obligations, commitments, and unexpended balances
(available or to be made available) of appropriations, allocations, and
other funds of the Treasury Department as the Director of the Bureau
of the Budget shall determine to relate primarily to the functions trans-
ferred by the provisions of this subsection.
(c) Any other provision of this section not withstanding, there may
be retained in the Department of the Treasury any function referred
to in subsection (a) of this section which the Director of the Bureau
of the Budget shall, within ten days after the effective date of this
Act, determine to be essential to the orderly administration of the
affairs of the agencies of such Department, other than the Bureau of
Federal Supply, together with such records, property, personnel, ob-
ligations, commitments, and unexpended balances of appropriations,
allocations, and other funds, available or to be made available of said
Department, as said Director shall determine.
SEc. 103. (a) All functions of the Federal Works Agency and of all
agencies thereof, together with all functions of the Federal Works
Administrator, of the Commissioner of Public Buildings, and of the
Commissioner of Public Roads, are hereby transferred to the Admin-
istrator of General Services. There are hereby transferred to the
General Services Administration the Public Roads Administration,
which shall hereafter be known as the Bureau of Public Roads, and
all records, property, personnel, obligations, and commitments of the
Federal Works Agency, including those of all agencies of the Federal
Works Agency.
(b) There are hereby abolished the Federal Works Agency, the Pub-
lic Buildings Administration, the office of Federal Works Adminis-
trator, the office of Commissioner of Public Buildings, and the office
of Assistant Federal Works Administrator.
RECORDS MANAGEMENT : TRANSFER OF THE NATIONAL ARCHIVES
SEC. 104. (a) The National Archives Establishment and its func-
tions, records, property, personnel, obligations, and commitments are
hereby transferred to the General Services Administration. There are
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70 AUTOMATIC DATA PROCESSING EQUIPMENT
transferred to the Administrator (1) the functions of the Archivist of
the United States, except that the Archivist shall continue to be a
member or chairman, as the case may be, of the bodies referred to in
subsection (b) of this section and (2) the functions of the Director of
the Division of the Federal kegister of the National Archives Estab-
lishment. The Archivist of the United States shall hereafter be
appointed by the Administrator.
(b) There are also transferred to the General Services Administra-
tion the following bodies, together with their respective functions and
such funds as are derived from Federal sources : (1) The National
Archives Council and the National Historical Publications Commis-
sion, established by the Act of June 19, 1934 (48 Stat. 1122), (2) the
National Archives Trust Fund Board, established by the Act of July
9, 1941 (55 Stat. 581), (3) the Board of Trustees of the Franklin D.
Roosevelt Library, established by the Joint Resolution of July 18, 1939
(53 Stat. 1062), and (4) the Administrative Committee established by
section 6 of the Act of July 26, 1935 (49 Stat. 501), which shall here-
after be known as the Administrative Committee of the Federal Reg-
ister. The authority of the Administrator under section 106 hereof
shall not extend to the bodies or functions affected by this subsection.
(c) The Administrator is authorized (1) to make surveys of Gov-
ernment records and records management and disposal practices and
obtain reports thereon from Federal agencies; (2) to promote., in
cooperation with the executive agencies, improved records manage-
ment practices and controls in such agencies, including the central
storage or disposition of records not needed by such agencies for their
current use. and (3) to report to the Congress and the Director of the
Bureau of the Budget from time to time the results of such activities.
TRANSFER FOR LIQUIDATION OF TILE AFFAIRS OF Till WAR ASSETS
ADMINISTRATION
SEC. 105. The functions, records, property, personnel, obligations,
and commitments of the War Assets Administration are hereby trans-
ferred to the General Services Administration. The functions of the
War Assets Administrator are hereby transferred to the Adminis-
trator of General Services. The War russets Administration, the office
of the War Assets Administrator, and the office of Associate War
Assets Administrator are hereby abolished. Personnel now holding
appointments granted under the second sentence of section 5 (b) of the
Surplus Property Act of 1944, as amended, may be continued in such
positions or may be appointed to similar positions for such time as the
Administrator may determine.
SEc. 106. The Administrator is hereby authorized, in his discretion,
in order to provide for the effective accomplishment of the functions
transferred to or vested in him by this Act, and from time to time, to
regroup transfer, and distribute any such functions within the General
Services Administration. The Ainistrator is hereby authorized to
transfer the funds necessary to accomplish said functions and report
such transfers of funds to the Director of the Bureau of the Budget.
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AUTOMATIC DATA PROCESSING EQUIPMENT
SEC. 107. (a) All unexpended balances of appropriations, allocations,
or other funds available or to be made available, for the use of the Bu-
reau of Federal Supply, the War Assets Administration, the Federal
Works Agency, and the National Archives Establishment, and so much
of the other unexpended balances of appropriations, allocations, or oth-
er funds of the Department of the Treasury, available or to be made
available, as the Director of the Bureau of the Budget shall determine
to relate primarily to functions transferred to or vested in the Ad-
ministrator by the provisions of this Act, shall be transferred to the
General Services Administration for use in connection with the func-
tions to which such balances relate, respectively.
(b) When other functions are transferred to the General Services
Administration from any Federal agency, under section 201 (a) (2)
or (3 , or otherwise under this Act, there shall be transferred such
recor s, property, personnel, appropriations, allocations, and other
funds of such agency to the General Services Administration as the
Director of the Bureau of the Budget shall determine to relate pri-
marily to the functions so transferred.
SEC. 108. Subject to other provisions of this title relating to person-
nel, employees transferred by the provisions of this title shall be
deemed to be employees of the General Services Administration and
their reappointment shall not be required by reason of the enactment of
this Act.
SEC. 109. (a) There is hereby authorized to be set aside in the Treas-
ury a special fund which shall be known as the General Supply Fund.
Such fund shall be composed of the assets of the general supply fund
(including any surplus therein) created by section 3 of the Act of Feb-
ruary 27, 1929 (45 Stat. 1342; 41 U.S.C. 7c), and transferred to the
Administrator by section 102 of this Act, such sums as may be appro-
priated thereto, and the value, as determined by the Admi nistrator, of
inventories of personal property from time to time transferred to the
Administrator by other executive agencies under authority of section
201 (a) (2) to the extent that payment is not made or credit allowed
therefor, and the fund shall assume all of the liabilities, obligations,
and commitments of the general supply fund created by such Act of
February 27, 1929. The General Supply Fund shall be available for
use by or under the direction and control of the Administrator (1) for
procuring personal. property (including the purchase from or through
the Public Printer, for warehouse issue, of standard forms, blank-book
work, standard specifications, and other printed material in common
use by Federal agencies not available through the Superintendent of
Documents) and nonpersonal services for the use of Federal agencies
in the proper discharge of their responsibilities, and (2) for paying
the purchase price, transportation of personal property and services,
and the cost of personal services emplpoyed directly in the repair, re-
habilitation, and conversion of personal property.
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AUTOMATIC DATA PROCESSING EQUIPMENT
(b) Payment by requisitioning agencies shall be at Prices fixed by
the Administrator. Such prices shall be fixed at levels so as to re-
cover so far as practicable the applicable purchase price, the trans-
portation cost, inventory losses the cost of personal services em-
ployed directly in the repair, reliabilitation, and conversion of per-
sonal property, and the cost of amortization and repair of equipment
utilized for lease or rent to executive agencies. Requisitioning agen-
cies shall pay by iulvance of funds in aTi cases where it is determined
y the Administrator that there is insufficient capital otherwise avail-
le in the General Supply Fund. Advances of funds also may be
made by agreement between the requisitioning agencies and the Ad-
ministrator. Where an advance of funds is not made, the General
Services Administration shall be reimbursed promptly out of funds
of the requisit.ioniug agency in accordance with accounting procedures
approved by the Comptroller General: Provided, That in any case
where payment shall not have been made by the requisitioning agency
within forty-five days after the date of billing by the Administrator
or the date on which an actual liability for personal property or serv-
ices is incurred by the Administrator which ever is the later, reim-
bursement may be obtained by the Administrator by the issuance of
transfer and counterwarrants, or other lawful transfer documents,
supported by itemized invoices.
(c) The + eneral Supply Fund shall be credited with all reimburse-
ments, advances of funds, and refunds or recoveries relating to per-
sonal property or services procured through the fund, including the
net proceeds of disposal of surplus personal property procured through
the fund and receipts from carriers and others for loss of or damage
to, personal property rocured through the fund; and the same are
Hereby reappropriated for the purposes of the fund.
(d) [Repealed.]
(e) The Comptroller General of the United States shall make an
annual audit of the General Su ply Fund as of June 30, and there
shall be covered into the United States Treasury as miscellaneous,
receipts any surplus found therein, all assets, liabilities, and prior losses
considered, above the amounts transferred or appropriated to establish
and maintain said fund, and the Comptroller General shall report to
the Congress annually the results of the audit., together with such
recommendations as he may have regarding the status and operations
of the fund.
(f) Subject to the requirements of subsections (a.) to (e), inclusive,
of this section, the General Supply Fund also may be used for the pro-
curement of personal property and nonpersonal services authorized to
be acquired by mixed-ownership Government corporations, or by the
municipal government of the District of Columbia, or by a requisition-
ing non-Federal agency when the function of a Federal agency
authorized to procure for it is transferred to the General Services
Administration.
(g) Whenever any producer or vendor shall tender any article or
commodity for sale or lease to the General Services Administration or
to any procurement authority acting under the direction and control of
the Administrator pursuant to this Act, the Adminisrator is author-
ized in his discretion, with the consent of such producer or vendor, to
cause to be conducted, in such manner as the Administrator shall
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 Approved For Release DATA PR/OdE~Sk ~ r446R0006 050003-8
specify, such tests as he shall precribe either to determine whether
such article or commodity conforms to prescribed specifications and
standards, or to aid in the development of contemplated specifications
and standards. When the Administrator determines that the making
of such tests will serve predominantly the interest of such producer or
vendor, he shall charge such producer or vendor a fee which shall
be fixed by the Administrator is such amount as will recover the cost of
conducting such tests, including all components of such cost, deter-
mined in accordance with accepted accounting principles. When the
Administrator determines that the making of such tests will not serve
predominantly the interest of such producer or vendor, he shall charge
such producer or vendor such fee as he shall determine to be reasonable
for the furnishing of such testing service. All such fees collected by
the Administrator may be deposited in the general supply fund to be
used for any purpose authorized by subsection 109 (a) of this Act.
SEc. 110. There is hereby authorized to be established on the books
of the Treasury, a Federal telecommunications fund, which shall be
available without fiscal year limitation for expenses, including per-
sonal services, other' costs, and the procurement by lease or purchase
of equipment and operating facilities (including cryptographic de-
vices) necessary for the operation of a Federal telecommunciations
system, to provide local and long-distance voice, teletype, data, fac-
simile, and other communication services. There are authorized to be
appropriated to said fund such sums as may be required which,
together with the value, as determined by the Administrator, of sup-
plies and equipment from time to time transferred to the Adminis-
trator under authority of section 205 (f), less any liabilities assumed,
shall constitute the capital of the fund : Provided, That said fund shall
be credited with (1) advances and reimbursements from available
appropriations and funds of any agency (including the General Serv-
ices Administration), organization, or persons for telecommunication
services rendered and facilities made available thereto, at rates deter-
mined by the Administrator to approximate the cost 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 costs, 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 and receipts from carriers and
others for loss of or damage to property: Provided further, That fol-
lowing the close of each fiscal year any net income, after making pro-
vision for prior year losses, if any, shall be transferred to the Treasury
of the United States as miscellaneous receipts.
Sec. 111. (a) The Administrator is authorized and directed to co-
ordinate and provide for the economic and efficient purchase, lease,
and maintenance of automatic data processing equipment by Federal
agencies.
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 Apprcfed For Rel~5/~/1 -RCIe6 0446nR000600050003-8
(b) (1) Automatic data processing equipment suitable for e ent
and effective use by Federal agencies shall be provided b t).Ad-
ministrator 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 responsi-
bilities tinder this section the Administrator is authorized to trans-
fer automatic data processing equipment between Federal agencies,
to provide for joint utilization of such equipment by two or more Fed-
eral agencies, and to establish and operate equipment pools and data
processing centers for the use of two or more such agencies when
necessary for its most efficient and effective utilization.
(2) The Administrator may delegate to one or more Federal agen-
cies authority to operate automatic data ~rrocessing equipment pools
and automatic data processing centers, and to lease, purchase, or main-
tain individual automatic data processing systems or specific units of
equipment, including such equipment used in automatic data proe-
essing pools and automatic data processin centers, when such, ac-
tion is determined by the Administrator to be necessary for the econ-
omy and efficiency of operations, or when such action is essential to
national defense or national security. The Administrator may dele-
gate to one or more Federal agencies authority to lease, purchase, or
maintain automatic data processing equipment to the extent to which
he determines such action to be necessary and desirable to allow for
the Orderly implementation of a program for the utilization of such
equipment.
(c) There is hereby authorized to be established on the books of
the Treasury an automatic data processing fund, which shall be avail-
able without fiscal year limitation far expenses, including personal
services, other costs, and the procurement by lease, purchase, trans-
fer, or otherwise of equipment, maintenance, and repair of such
equipment by contract or otherwise, necessary for the efficient
coordination, operation, utilization of such equipment by and for Fed-
eral agencies: Provided, That a report of equipment inventory, utili-
zation, and acquisitions, together with an account of receipts dzsburse-
ntents. and transfers to miscellaneous receipts. under this aut)torization
shall be trtade annually in connection with the budget estimates to the
Director of the Bureau of the Budget and to the Congress, and the in-
clusion in appropriation acts Of provisions regulating the operation
of the automatic data processing fund, or limiting the expenditures
therefrom, is hereby authorized.
(d) There are authorized to be appropriated to said fund such sums
as may be required which, together with the value, as determined by
the Administrator, of supplies and equipment from time to time trans-
ferred to the Administrator, shall constitute the capital of the fund.-
Provided, That said fund shall be credited with (1) advances and re-
imbursements from available aypropriations and funds of any agency
(including the General ,Services Administration), organization, or
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contractor 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 for amortization of installation costs, but excluding,
in the determination of rates prior to the fiscal year 1967, 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 (9 refunds or recoveries re-
sulting from operations of the fund, including the net proceeds of dis-
posal of excess or survlus personal property and 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 miscellaneous receipts.
(e) The proviso following paragraph (4) in section 201(a) of this
Act and the provisions of section 602 ~d) of this Act shall have no
application in the administration of this section. No other provision
of this Act or any other Act which is inconsistent with the provisions
o f this section shall be applicable in the administration o f this section.
(f) The Secretary o f Commae r ce is authorized (1) to provide agen-
cies, and the Administrato f General Services in the exercise o f the
authority delegated in this section, with scientific and technological
advisory services relating to automatic data processing and related
systems, and (2) to make appropriate recommendations to the Presi-
dent relating to the establishment of uniform Federal automatic data
processing standards. The Secretary of Commerce is authorized to
undertake the necessary research in the sciences and technologies of
automatic data processing computer and related systems, as may be
required under provisions of this subsection.
(g) The authority conferred upon the Administrator and the Sec-
retary of Commerce by this section shall be exercised subject to direc-
tion by the President and to fiscal and policy control exercised by the
Bureau of the Budget. Authority so conferred upon the Adminis-
trator shall not be so construed as to impair or interfere with the de-
termination by agencies of their individual automatic data processing
equipment requirements, including the development of specifications
for and the selection of the types and configurations of equipment
needed. The Administrator shall not interfere with, or attempt to
control in any way, the use made of automatic data processing equip-
ment or components thereof by any agency. The Administrator shall
provide adequate notice to all agencies and other users concerned with
respect to each proposed determination specifically affecting them or
,the automatic data processing equipment or components used by them,.
In the absence of mutual agreement between the Administrator and
the agency or user concerned, such proposed determinations shall be
subject to review and decision by the Bureau of the Budget unless the
President otherwise directs.
0
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