AUTHORIZING THE ADMINISTRATOR OF THE GENERAL SERVICES ADMINISTRATION TO COORDINATE AND OTHERWISE PROVIDE FOR THE ECONOMIC AND EFFICIENT PURCHASE, LEASE, MAINTENANCE, OPERATION, AND UTILIZATION OF AUTOMATIC DATA PROCESSING EQUIPMENT BY FEDER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP66B00403R000300330006-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 48
• Document Creation Date: December 23, 2016
• Document Release Date: March 6, 2014
• Sequence Number: 6
• Publication Date: June 19, 1963
• Content Type: REPORT

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Union Calendar No. 186
88TH CONGRESS t HOUSE OF REPRESENTATIVES J REPORT
1st Session f No. 428
AUTHORIZING THE ADMINISTRATOR OF THE GENERAL SERVICES
ADMINISTRATION TO COORDINATE AND OTHERWISE PROVIDE
FOR THE ECONOMIC AND EFFICIENT PURCHASE, LEASE, MAIN-
TENANCE, OPERATION, AND UTILIZATION OF AUTOMATIC
DATA PROCESSING EQUIPMENT BY FEDERAL DEPARTMENTS
AND AGENCIES
JUNE 19, 1963.?Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Mr. BROOKS, from the Committee on Government Operations,
submitted the following
REPORT
[To accompany II.R. 5171]
The Committee on Government Operations, to whom was referred
the bill (H.R. 5171) to authorize the Administrator of the General
Services Administration to coordinate and otherwise provide for the
economic and efficient purchase, lease, maintenance, operation, and
utilization of automatic data processing equipment by Federal
departments and agencies, having considered the same, report favor-
ably thereon with amendments and recommend that the bill, as
amended, do pass. The amendments are as follows:
1. Page 1, line 6, after "SEC. 111." insert "(a)".
2. Page 1, line 8, strike the word "electronic" and insert in lieu
thereof the word "automatic".
3. Page 1, line 8, after the word "by" add a comma and the fol-
lowing: "or at the expense of,".
4. Page 2, lines 2 and 3, strike out "Electronic data processing
equipment suitable for efficient and", and immediately after line 3
insert the following:
"(b) Automatic data processing equipment suitable for efficient
and".
5. Page 2, line 10, strike the word "electronic" and insert in lieu
thereof the word "automatic".
6,/ Page 2, beginning in line 17, strike out "(1)" and what follows
thereafter down through page 21 line 21, and insert in lieu thereof the
following: "individual automatic data proces'sing systems or specific
units of equipment, when such action is necessary for the economy
85006-63-1
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2 AUTOMATIC DATA PROCESSING EQUIPMENT
and efficiency of operations, or when such action is essential to defense
or security: Provided further, That the Administrator, in his discretion,
prior to the beginning of fiscal year 1966, may delegate authority to
lease, purchase, maintain, or operate automatic data processing equip-
ment to the various Federal agencies to the extent necessary and
desirable to allow for the orderly implementation of this utilization
program."
7. Page 2, line 22, after the quotation mark at the beginning of the
line, insert "(c)".
8. Page 2, line 23, strike "Treasury," and insert in lieu thereof
"Treasury".
9. Page 2, line 23, strike the word "electronic" and insert in lieu
thereof the word "automatic".
10. Page 3, line 5, strike the word "agencies." and insert the fol-
lowing: "agencies: Provided, That a report of receipts, disbursements,
and transfers to miscellaneous receipts, under this authorization shall
be made annually in connection with the budget estimates to the
Director of the Bureau of the Budget and to the Congress."
11. Page 3, after the quotation marks at the beginning of line 6,
insert "(d)".
12. Page 3, line 10, strike out "less any liabilities assumed,".
13. Page 3, line 14, strike out "persons" and insert in lieu thereof
"contractor".
14. Page 3, lines 18 and 19, strike out "and where appropriate, for
terminal liability charges".
15. Page 4, line 7, strike out "receipts.' " and insert "receipts."
16. Page 4, after line 7 add the following new subsection:
(e) The proviso accompanying section 201(a) (63 Stat.
383), the provisions of section 602(d) (63 Stat. 401), and any
other provisions of the Federal Property and Administrative
Services Act of 1949, as amended (63 Stat. 377), or of any
other provisions of law which are inconsistent with the pur-
poses and provisions of section 111 shall not be applicable.
17. Amend the title so as to read:
A bill to authorize the Administrator of the General
Services Administration to coordinate and otherwise pro-
vide for the economic and efficient purchase, lease, mainte-
nance, operation, and utilization of automatic data processing
equipment by Federal departments and agencies.
THE PURPOSES OF THE BILL
Savings the Comptroller General of the United States authorita-
tively estimates as substantially in excess of $100 million a year can
be realized through effective and efficient centralized management of
Government ADP (automatic data processing) equipment. H.R.
5171 provides the centralized management that the ,Comptroller
General recommends.
H.R. 5171 carries out recommendations of the Comptroller General
The provisions of H.R. 5171 stem from a recent' report of the
Corn ptroller General and the continuing concern of this committee that
it full dollar' a worth of efficient, responsive Government be obtained for
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AUTOMATIC DATA PROCESSING EQUIPMENT
3
every tax dollar. In a report submitted to Congress on March 6,
1963, entitled, "A Study of Financial Advantages of Purchasing Over
Leasing of Electronic Data Processing Equipment in the Federal
Government," the Comptroller General emphasized the need for
centralized management as a means of obtaining maximum utilization
and economical acquisition of this costly, but highly useful, equipment.
He authoritatively outlined the cash savings which can result from
such a proFam. In this report, he stated:
Our study shows that very substantial amounts of money
could, be saved if the Federal Government purchased more
of its data processing equipment needs. The detailed cost
comparisons of 16 different electronic machine models, which
constituted the principal part of our study, indicate potential
savings of about $148 million over a 5-year period. These
significant possible savings apply to only 523 of approxi-
mately 1,000 electronic data processing systems installed or
planned for installation on a lease basis by June 30, 1963.
For additional use of the 523 machines after 5 years, there
would be further savings at the rate of over 8100 million
annually.'
The Comptroller General then outlined the need for and the purpose
of H.R. 5171:
Decisions as to the financial advantages of purchasing will
have to be made from the standpoint of the Government as a
whole, and not primarily from the standpoint of individual
using agencies as has been the practice in the past. In addi-
tion, more attention needs to be given to obtaining more
complete utilization of the equipment acquired. We -believe
that the only practicable way in which the kind of coor-
dinated management can be practiced to achieve the possible
financial savings cited is through the establishment of a
small, highly placed central management office in the execu-
tive branch of the Government.2
Under provisions of H.R. 5171, the Administrator of General Services is
charged with the management of ADP equipment
This authority would be exercised under the overall authority of the
Executive Office of the President and, the Bureau of the Budget in the
exercise of traditional budgetary and policy control. The General
Services Administration (GSA), under the direction of the Adminis-
trator of General Services, is an operating agency of the executive
branch especially created by Congress to perform centralized procure-
ment and property management functions. In the Federal Property
and Administrative Services Act of 1949, as amended, the GSA has
been assigned broad responsibilities pertaining to the procurement,
supply and maintenance of real and personal property and nonpersonal
services. H.R. 5171, which is an amendment to title I of this act,
therefore, constitutes a logical extension of comparable responsibilities
so as to provide much needed centralized procurement and manage-
ment of this costly data processing equipment.
I Prefatory letter of Comptroller General accompanying GAO report, "Study of Financial Advantages of
Purchasing Over Leasing of Electronic Data Processing Equipment in the Federal Government," (March
1963).
I Id.
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4 AUTOMATIC DATA PROCESSING EQUIPMENT
Centralized management would mean more effective control of Government
ADP activities by the Bureau of the Budget and the Congress
Under this centralized management program, legislative review and
control of Government ADP operations can also be greatly improved.
During the hearings on H.R. 5171, the Comptroller General predicted
an ever-increasing rate of growth in the use of this equipment in
Government. He suggested that:
* * * we are discussing here a fixed charge on the Gdvern-
merit. This is very much like the fixed charge on the debt.
?What we are seeing here is growing into what * * * will be
a major fixed charge which cannot be reduced and which will
probably grow and properly so if we are going to control what
goes on in the Government.3
Use of ADP systems in Government has increased from 414 in 1959
to 1,169 in 1963; and it is estimated that by the end of 1964, approxi-
mately 1,600 systems will be in use.' As indicated in the March 6
report of the Comptroller General, approximately 85 percent of these
systems are leased without comprehensive evaluation as to the benefits
to the taxpayers of purchase. Budgetary appropriation requests for
hundreds of millions of dollars spent each year by Federal agencies
and other users for the equipment are scattered throughout the Fed-
eral budget making it difficult for Congress and the Executive Office
of the President to maintain effective budgetary control over these
expenditures which, as the Comptroller General predicted, can be
expected to increase substantially during the years to come.
Following approval of H.R. 5171, comprehensive information?
from one source?will be available to the Bureau of the Budget and
to the substantive committees of Congress as a valuable aid to plans
and programs involving ADP utilization in future Government opera-
tions. The Appropriations Committees will have all the facts con-
cerning all ADP equipment readily available in determining proper
funding for these essential, but costly, installations. Effective cen-
tralization of the management of ADP equipment will also materially
assist the Government Operations Committees and the Comptroller
General in our periodic reviews of these costly activities.
The Administrator of General Services would provide the equipment, the
user agencies would determine their individual requirements
Under provisions of this bill, the Administrator of General Services
is authorized and directed to coordinate and control, on a Government-
wide basis, the purchase, lease, and maintenance of ADP equipment,
and to provide for the operation of this equipment for use by Federal
agencies as well as contractors and others utilizing such equipment
for and at the expense of the Government. Federal agencies and
other users would determine their individual ADP requirements. The
Administrator and his expert staff would be available for advice and
consultation. But, the agency or user would determine the nature
of their requirements. The Administrator would then make suitable
equipment or adequate ADP capacity available to meet these stated
requirements.
Hearings, "Economic and Efficient Use of Automatic Data Processing Equipment (H.R. 5171)," before
the Government Activities Subcommittee of the House Cominittee on Government Operations, May 28,
1963, p. 15.
The ADP systems discussed in the Comptroller General's report of Mar. 6, 1963, are exclusive of those
used for military tactical operations, intelligence, surveillance systems, and certain other military programs.
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AUTOMATIC DATA PROCESSING EQUIPMENT 5
Generally, agencies and other users would pay into the ADP revolv-
ing fund, created under this bill, annual payments as determined by
the Administrator sufficient to cover the cost of providino?b the equip-
ment and services furnished them. The Administrator, in turn, utiliz-
ing the capital in the revolving fund, would acquire, by lease or
purchase, equipment of whatever type, design, and capacity was
necessary to fulfill the individual requirements of the agencies and
other users.
Full utilization and economical acquisition are essential to an effective
and efficient Governmentwide ADP program
As the Comptroller General suggests above, effective and efficient
management of ADP equipment on a Governmentwide basis depends
upon two essential considerations. First, optimum or maximum
utilization of ADP equipment now on hand and to be acquired in the
future; and, second, an economical acquisition program.
Full utilization requires centralized management
To assure optimum utilization, the Administrator would first provide
the equipment or capacity most suitable for the particular require-
ments of the various agencies and other users makinc, prompt adjust-
ments in the equipment or capacity available to them according to
their increasing or changing needs. By these means, together with
the establishment of ADP equipment pools and centers, through joint
utilization, and through the prompt transfer of equipment whenever
necessary or desirable, the Administrator would constantly seek to
obtain the highest possible hourly utilization of such equipment on a
round-the-clock, 24-hour-a-day basis-an "elementary" consideration
in obtaining the optimum benefit of such equipment, according to the
Comptroller General.
The Comptroller General, in his March 6, 1963, report, outlined in detail
the essentiality of full utilization to economic and efficient operation
He made the obvious recommendation that agencies should first
make full use of equipment on hand before obtaining new or additional
equipment. The economic benefits of full utilization apply to both
leased and purchased equipment, with a more pronounced benefit
flowing from the purchase of most systems or components used on a
three-shift basis. The following schedules, utilizing representative
ADP systems in general use in the Government, illustrate these
benefits:
Examples of the benefit of full utilization of leased equipment on 5-year basis
Cost to
Cost to
IBM system
operate 3
systems on a
operate 1
system on a
Savings
1-shift basis
3-shift basis
7090
$12, 828, 000
$7, 696, 000
$5, 132, 000
7080
8, 958, 000
5, 375, 000
3, 583, 000
7070
3, 111,500
1, 867, 000
1, 244, 000
1410
2, 334, 000
1, 401, 000
933, 000
1401 1
1, 326, 000
795, 000
531, 000
1401 2
1, 254. 000
753, 000
501, 000
1401 3
531, 000
310, 000
212, 000
I Card and tape system operated as off-line equipment to a larger system.
3 Card and tape system.
Card system.
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6. AUTOMATIC DATA PROCESSING EQUIPMENT
Examples of the additional benefit of full utilization of purchased equipment for
initial 5-year period following purchase
Cost to
1 shift
2 shift
3 shift
IBM system
purchase 1
Amount of
Rate of
Amount of
Rate of
Amount of
Rate of
purchase
purchase
purchase
purchase
purchase
purchase
advantage
advan-
tage
advantage
ad van-
tage
advantage
advan-
tage
Percent
Percent
Percent
7090
$3, 632, 000
$644, 000
18
$2, 184, 000
57
$3, 724, 000
94
7080
2, 653, 000
333, 000
13
1, 397, 000
50
2, 461, 000
84
7070
967, 000
70, 000
7
432, 000
42
795,000
74
1410
711, 000
67, 000
9
323, 000
42
579, 000
70
1401 2
415. 000
27, 000
7
158, 000
34
288, 000
57
1401 1
411, 000
7,000
2
137, 000
31
267. 000
55
1401 4
188, 000
-11, 000
-6
41, 000
20
94, 000
42
1 Includes maintenance for 1 shift only.
1 Card and tape system operated as off-line equipment to a larger system
3 Card and tape system.
4 Card system.
Government agencies are not fully utilizing ADP equipment at this time
The Bureau of the Budget inventory report of August 1962 of
installed ADP equipment shows numerous examples of extremely low
utilization of equipment throughout the Government. The average
utilization of this costly equipment was reported to be only 267 hours
per month out of a possible 720 hours.5 Only 24 percent of the total
installed equipment was reported as being operated the equivalent
of a two-shift day and only 6 percent was reported as being operated
on a three-shift day, leaving approximately 70 percent on a one-shift
basis, or less. Numerous purchased machines were reported as being
in operation one shift or less, while some leased machines were being
operated on a three-shift basis. In many instances, agencies reported
multiple units of the same type of equipment beinub used on a one-
shift basis; whereas, under a lease arrangement use beyond the first
shift is charged for at only 40 percent of the basic one-shift charges.
The wasteful practice of employing multiple units of the same kind
of equipment at the same location and not taking advantage of reduced
rates appears to be widespread throughout the Federal Government.
The lack of central coordination of this equipment is immediately
apparent by merely reviewing the inventory listing published by the
Bureau of the Budget. Yet unnecessary costs for this equipment
continue to mount month by month because full utilization is not
being achieved. Central management can almost immediately begin
to achieve savings by increasing the utilization of the equipment the
Government now has on hand, be it leased or purchased.
Economical and efficient ADP acquisition requires centralized manage-
ment
With the authority extended him in H.R. 5171, the Administrator
can also develop an economical ADP acquisition program. As indi-
cated in the Comptroller General's March 6, 1963, report to Congress,
in many situations it is decidedly to the benefit of the Government
to purchase rather than lease ADP systems and components thereof.
. 5 176 hours is considered as a regular shift. This shift is based upon 8 hours a day times 22 working days
In a 30-day month.
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AUTOMATIC DATA PROCESSING EQUIPMENT
7
In this report, he emphasized that the decision to either lease or
purchase, however?
will have to be made from the standpoint of the Government
as a whole, and not primarily from the standpoint of individ-
ual using agencies as has been the practice in the past.?
Under H.R. 5171, with centralized management authority, the Ad-
ministrator would be able to make the necessary lease versus purchase
cost comparisons suggested as essential by the Comptroller General.
The Administrator could make these comparisons on the basis of
the estimated useful life of the equipment to the Government "as a
whole," rather than the estimated period the initial using agency
might have need for equipment of the particular design and capacity
to be acquired. At a later date, should that agency develop require-
ments for equipment of greater capacity or of more modern design,
the older equipment then in use could be promptly reassigned to other
agencies or users with less demanding requirements. The transfer
of equipment would allow the Government to obtain the optimum
benefit from all equipment either purchased or leased. Equipment
which could meet the requirements of any agency or user would not be
discarded. The benefit of exercising purchase options on leased
equipment could be continuously evaluated and advantageous offers
to sell leased equipment could be promptly accepted. Only upon
reachinab economic obsolesence would equipment be withdrawn from
use and disposed of as surplus Federal property or, if leased, returned
to the lessor.
As all equipment would be purchased or leased by the Administrator
with capital from the ADP revolving fund, no funding problems would
arise as a result of such transfers. The Administrator would simply
make the necessary adjustments in the annual "use" payments of the
affected agencies or users. Without such a fund as provided in H.R.
5171, the transfer and the 'joint utilization of ADP equipment owned
by any particular agency could create funding problems and seriously
compromise any Government-wide centralized management program.7
The Comptroller General's studies indicate the financial advantage of
purchase rather than lease of most ADP systems and components
In the March 6, 1963, report, the Comptroller General, utilizing
523 representative leased ADP systems out of 1,006 either in use or
scheduled for use by the end of fiscal year 1963, established the obvious
advantage of purchase over lease in the case of most ADP systems and
components. In this report, he showed that the total cost to lease
these 523 systems over a 5-year period, including maintenance and
interest, would be $646 million. He further showed that the total
purchase price of these representative 523 systems as new equipment
would amount to $365 million. Adding maintenance and interest
expenses for a 5-year period of $133 million, he obtained a total cost of
this equipment if purchased, for the first 5 years, of $498 million. On
the basis .of these figures, the total savings to the taxpayers through
purchase rather than lease of these representative systems would
Report, op. cit., cf., footnote 1.
The Defense Department's comments on the Comptroller General's Mar. 6, 1963, report, contain the
following:
"The report of the Comptroller General] does not concern itself with the funding problem associated with
central approval authority. Unless provisions are made, agencies initially requiring the equipment would
be responsible for financing equipments in excess of their individual requirements. This would introduce
funding problems that do not now exist in the data processing operations."
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8 AUTOMATIC DATA PROCESSING EQUIPMENT
amount to $148 million for the 5-year period ($646 million lease cost,
minus $498 million purchase cost, equals $148 million). The Comp-
troller General further determined that after the initial 5-year period,
savings resulting from the purchase of these representative 523
systems would amount to more than $100 million a year, for each
year of continued use beyond the 5-year period.'
The Comptroller General testified that these estimates of potential savings
were conservative
Several authoritative factors support his conclusion. First, only
523 of 1,006 systems expected to be leased by the Government at the
end of fiscal year 1963 were used in computing these estimates.
Consideration of all leased systems in use would obviously increase
these savings estimates. Second, as the testimony indicates, a sub-
stantial increase in the number of leased systems in Government use
is expected. Savings could also accrue through the selected purchase
of certain of this additionally acquired equipment. Third, and as
will be subsequently discussed, the committee has adopted an amend-
ment to H.R. 5171 extending centralized management to ADP equip-
ment acquired by contractors and others when used for and at the
expense of the Government. While the exact extent of this equipment
cannot be determined because of the lack of an adequate inventory,
extensive equipment would come within this category. Therefore,
sizable savings can also be expected as a result of its control under
this program. Fourth, in determining the advantages of lease versus
purchase in the March 6, 1963, report, the Comptroller General
evaluated each ADP system in its entirety and determined a net
savings. If these savings had been considered on the basis of the
individual components of these systems, the potential savings would
have greatly exceeded the savings outlined in the Comptroller Gen-
eral's report.' Finally, the determinations contained in the March 6
report were based upon representative utilization practices of the
individual agencies using the 523 systems. As pointed out earlier in
this report, maximum utilization of this equipment is essential for the
most effective, efficient, and economical use. Had the agencies
Use of the 5-year time period is explained as follows In the Comptroller General's Mar. 6, 1063, report:
"Federal Government experience with electronic data processing devices over the past 12 years has shown,
that with proper maintenance this type of equipment has a useful life span of at least 5 to 10 years. Some
of the machines installed in Federal agencies in the early and mid-1950's are still in service. Generally
speaking, the older machines that are still in use are those which were purchased outright by the Govern-
ment Also, despite the rapid changes that have taken place In equipment design, a large number of
machines that were rented were used for periods of 5 years or more before being replaced by more modern
equipment.
'It is generally agreed that the new 'second generation solid-state machines will have a considerably
longer useful life than the 'first generation' vacuum tube type of machines. * ? ?
"We selected 5 years as being a conservative estimate of the economic useful life of electronic data process-
ing machines for purposes of making comparisons of lease costs with purchase costs. It should be noted
that to the extent that this period is less than the actual useful life of the equipment, the computed savings
are understated."
'In the Mar. 6 report, the Comptroller General outlined the need for lease versus purchase evaluations
on a component by component basis as follows.
"The detailed cost comparisons of the 18 systems ? ? ? demonstrate that each component of a system
should be considered separately for lease or purchase. These computations show that the cost advantage
of purchasing some electromechanical components, such as printers, card readers, and card punches, is not
as great as the cost advantage available through the purchase of electronic components. In some cases, it
Is clearly disadvantageous to purchase electromechanical components. This is due in part to pricing policies
of equipment suppliers and to the greater need for maintenance on electromechanical components because
of the inherent wearing characteristics of mechanical parts. These factors would have to be weighed heavily
in considering the purchase of these components. It might well be that, for the small cost advantage avail-
able, it would not be worth the risk of purchasing a component that may cause a serious maintenance prob-
lem or one that may have to be completely replaced because of constantly increasing maintenance require
ments.
"Because of these factors, detailed corn pu tattoos such as those shown in exhibit (' should he made in order
to provide the financial information necessary for deciding which components should be purchased and
which ones should be leased."
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AUTOMATIC DATA PROCESSING EQUIPMENT 9
leasing the 523 systems, which were the subject of the Comptroller
General's study, used these systems to the extent necessary to achieve
optimum or maximum utilization, the lease costs over the initial
5-year period of $646 million would have been considerably higher.
And, the potential savings through initial purchase would have been
even more pronounced.
Achievement of the most effective and efficient Government ADP
program requires the centralized management provided in H.R. 5171.
By this means, full utilization of leased or purchased equipment can
be obtained. Furthermore, incident to obtaining full utilization, the
most beneficial acquisition program can be determined, taking into
consideration the obvious advantages of purchasing rather than leas-
ing most ADP components.
H.R. 5171 will not require large staff
The coordinated program, as provided in H.R. 5171, should not
require a large increase in the management staff of the Administrator
of General Services. In his testimony, he suggested the availability
of present employees. Furthermore, it is expected that implementa-
tion of this program will result in a lessening in personnel require-
ments of user agencies. Also, the program is such that automatic
data processing equipment can be used effectively to maintain inven-
tories and perform various other basic functions necessary to control
equipment and provide for its most effective and efficient use. It is
expected, however, that the Administrator would obtain the services
of the highest qualified individuals either from his present force at
GSA, by recruitment from private industry, or by transfer from some
other agency, to assist him in the management of this program.
Improvement in agency utilization practices will not require additional
capital
The Administrator can use the authority contained in H.R. 5171
to increase the utilization of ADP equipment now in use in various
agencies and in the hands of other users without the need for additional
capital. At the end of fiscal year 1963, an estimated 85 percent of
Government-used ADP equipment will be leased and, on the basis of
figures agencies furnished to the Bureau of the Budget, this percent-
age will not change appreciably during fiscal 1964. As previously
indicated, improvement in the utilization of this equipment would
constitute a notable gain in effectiveness and efficiency, even assum-
ing that the other recommendations in the Comptroller General's
report calling for increases in the purchase of ADP equipment, were
not implemented.
A centralized management program is necessary to determine the extent
of capital fund requirements for the purchase of ADP equipment
H.R. 5171 does not direct the Admiriistrator to purchase or lease
any ADP systems or components. The extent to which ADP equip-
ment should be purchased would depend upon a series of factors:
First, it would require an individual evaluation of each component
of every system now leased by Federal agencies or users to determine
the advantage, if any, from the standpoint of the Government as a
whole, of purchase versus lease. The Comptroller General's study
of the 523 systems discussed above was based upon the price of such
equipment when new. Many of these have been in use for several
H. Rept. 428, 88-1-2
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10 AUTOMATIC DATA PROCESSING EQUIPMENT
years, which would significantly reduce their value. Also, in numer-
ous instances, the Government has purchase rights and has acquired
substantial equities, which may be decisive in considering the ad-
vantages of exercising purchase options contained in these lease agree-
ments. Lastly, the amount of equipment -which will be necessary
to meet Government-wide requirements will depend to a great degree
upon full utilization of all available systems and components.
The second major factor affecting requirements to implement the
Comptroller General's purchase recommendation is the extent to
which the Bureau of the Budget and the President, from the standpoint
of overall fiscal policies and budgetary priorities, request capital for
the ADP revolving fund.
Lastly, the appropriations committees and the Congress as a whole
would have to approve any capital fund request which might be
presented in the GSA budget.
Assuming that either the Bureau of the Budget or the Congress
could not approve requests for sufficient capital to fully implement a
recommended purchase program, the Administrator could, on a se-
lective basis, purchase those systems or components thereof, offering
the greatest financial advantages. As indicated in the Comptroller
General's March 6 report, even a limited increase in the purchase of
certain costly systems would result in respectable savings to the tax-
payers. As an example, using an IBM 7090 system, with an initial
new equipment cost of $3.38 million, the savings stated in terms of
a percentage of return on investment on net additional first year
purchase capital would amount to 25 percent when this system is
used on a one-shift, 8-hours-a-day basis, at the end of 5 years. The
return on investment increases to 96 percent when the system is used
on a two-shift basis, and reaches 190 percent for three shifts. Under
this example, for an additional first-year investment of $1.96 million,
the taxpayers would save by the end of 5 years the sum of $3.72 million,
assuming the equipment were used on a three-shift basis, together
with an additional $1.42 million each year thereafter.?
to See the following tables:
Percentage of return on the net additional investment required to purchase an IBM 7090
[Dollars in millions]
1-shift
2-shift
3-shift
?
Purchase price
$3.38
$3.38
$3.38
Maintenance 1st year
.06
.09
.12
Total
3.44
3.47
3.50
Less rental 1st year
.86
1.20
1.54
Net additional investment required to purchase
2.58
2.27
1.96
Savings resulting from the investment through the 5th
year
.64
2.18
- 3.72
Percentage of return on the net additional investment
required to purchase at the end of 5 years
25
96
190
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Percentage of return on the net additional investrnCnt required to purchase an IBM 7080
? [Dollars in millions]
1-shift
2-shift
,
3-shift
Purchase price
. $2.46
$2.46
$2.46
Maintenance 1st year
.04
.00
?. .09
Total
2.50
2.52
2.55
Less rental 1st year
. 59
. 83
1.07
,
1.91
1.69
1.48
Net dditional investment required to purchase
Savings resulting from the investment through the 5th
year_
.33
1.40
2.46
Percentage of return on the net additional investment
required o purchase at the end of 5 years
17
83
166
Percentage of return on the net additional investment required to purchase a CDC 1604
[Dollars in millions]
1-shift ,
2-shift
3-shift ? ?
Purchase price
$1.57
$1.57
$1.57
Maintenance 1st year
.05
.09
.13
Total
1.62
. 1.66
1.70
Less rental 1st year ' '
. 55
. 77
.99
.
? 1.07
..
. 89
. 71
Net additional investment required to purchase_.
Savings resulting from the investment through the ?
5th' year
.92
1.83
2.74
,
Percentage of return on the net additional investment
required to purchase at the end of 5 years
86
,
206
.
386
Percentage of return on the net additional investment required to purchase Burroughs B-5000
[Dollars in millions] ?
1-shift
2-shift
- 3-shift
Purchase price
1.11
1.11
1.11
Maintenance let year
. 02
. 03
. 04
1.13
1.14
1.15
Less rental 1st year
.30
. 43
. 55
Net additional investment required to purchase
.83
.71
? .60
Savings resulting from the investment through the 5th
year
.32
.89
1.46
Percentage of return on the net additional investment
required to purchase at the end of 5 years
39
125
243
Percentage of return on the net additional investment required to purchase an IBM 1410
[Dollars in millions]
1-shift
2-shift
3-shift
Purchase price
0.66
0.66
0.66
Maintenance 1st year .
.01
. 02
.03
Total
.67
.68
.69
Less rental 1st year
.16
.22
.28
Net additional investment requires! to purchase _ _
.51
.46
.41
Savings resulting from the investment through the 5th
year
.07
.32
.58
Percentage of return on the net additional investment
required to purchase at the end of 5 years ? ?
14
70
142
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12 AUTOMATIC DATA PROCESSING EQUIPMENT
COMMITTEE AMENDMENTS
Aside from a number of minor perfecting amendments, the com-
mittee has adopted four amendments based primarily upon the recom-
mendations of the Comptroller General and the Administrator of
General Services. First, H.R. 5171 has been amended so as to ex-
tend its provisions to encompass automatic data processing equip-
ment. The Administrator of General Services suggested that:
This change is regarded as desirable to make it absolutely
clear that the authority of GSA would extend to complete
data processing systems which may include electronic
computers as well as such related items as punchcard equip-
ment and tabulating machines, which, while part of the
system, may not technically be within the term "elec-
tronic." "
For this reason, and as suggested by the Comptroller General,
"in order to place a wider range of equipment within the scope of
authority of the General Services Administration," 12 the word
"automatic" was substituted for "electronic" wherever it appears
in the bill.
In subsection (a), the language, "or at the expense of" has been
added so as to extend the provisions of H.R. 5171 to include contrac-
tors and others who, under agreements with Federal agencies, acquire
or use ADP equipment for and at the expense of the Federal Govern-
ment. This amendment was also recommended by both the Admin-
istrator of General Services and the Comptroller General, the latter
suggesting in his report on H.R. 5171 that:
We believe that, to the maximum extent practicable, such
equipment or systems required by contractors in the per-
formance of negotiated contracts with the Federal agencies
where the whole or a substantial part of the cost of such
equipment or systems would become a part of Government
contract prices should likewise be furnished by the Govern-
ment with title or leasehold interest remaining in the Govern-
ment subject substantially to the same laws and regulations
applicable to in-house Government equipment."
Another significant amendment relates to the delegation of the
authority extended the Administrator of General Services under pro-
visions of the bill. Both the Administrator and the Comptroller
General recommended that the centralized management program
provided in H.R. 5171 not be compromised by exception. The com-
mittee agrees. However, authority to delegate the power to manage
ADP equipment is authorized in two distinct situations. First, the
Administrator is authorized to delegate authority relative to specific
ADP systems and components thereof for purposes of economy and
efficiency or when essential td national defense and security. In a
program of the scope envisaged in H.R. 5171, circumstances of a
unique character might develop which would make such delegations
necessary.
11 Letter of Bernard L. Boutin, Administrator of General Services, to William L. Dawson, chairman,
House Committee on Government Operations, dated May 27, 1963. (Cl. hearing (app.
12 Letter ofJoseph Campbell, Comptroller General of the United States, to William L. Dawson, chairman,
House Committee on Government Operations, dated May 15, 1963. (Cf. hearing (app.
la Id.
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13
Then, on an interim basis, until the beginning of fiscal year 1966,
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 centralized utilization
program.
Also, as an additional safeguard to assure Bureau of the Budget and
Congressional control over expenditures from the ADP revolving fund
as provided for in subsection (b), a proviso is added requiring that a
report of receipts, disbursements, and transfers to miscellaneous re-
ceipts under this authorization be made annually in connection with
the budget estimates to the Director of the Bureau of the Budget and
to the Congress.
Finally, in order to assure Government-wide applicability of the
program, a subsection (e) has been added providing for the inapplica-
bility of other provisions of law inconsistent with H.R. 5171.
SECTION BY SECTION ANALYSIS OF H.R. 5171
H.R. 5171 would add section 111 to the Federal Property and
Administrative Services Act of 1949 (63 Stat. 377), extending to the
Administrator of General Services exclusive responsibility, subject
to overall budgetary management policies of the President and the
Bureau of the Budget, for the acquisition, the maintenance, and the
-use of automatic data Processing equipment necessary to meet the
requirements of the various agencies of the Federal Government as
well as contractors and other organizations acquiring and using such
equipment at the expense of the GoVernment to be used for Govern-
ment purposes. The proposed new section is divided into five sub-
sections. Subsections (a) and (b) provide the basic authority to be
exercised by the Administrator. Subsection (c) authorizes the estab-
lishment of a revolving fund to finance the activities undertaken by
the Administrator in pursuance to this authority. Subsection (d) pro-
vides for the administration of this fund, and subsection (e) prescribes
that other provisions of law which would otherwise limit the extent
of the Administrator's authority shall not be applicable for the pur-
poses set forth in section 111.
Subsection (a) authorizes and directs the Administrator to coordi-
nate and control the purchase, lease, maintenance and use of automatic
data processing equipment, to meet the requirements of Federal
agencies as well as those acquiring such equipment to be used for and
at the expense of the Federal Government. Thus, this authority ex-
tends beyond in-house Government ADP equipment needs to that
which, pursuant to contract or agreement, the expense of lease, pur-
chase or maintenance is borne by the United States. If contracts or
agreements require the acquisition, or the continued use of, ADP
equipment and their costs are reimbursable by Federal agencies, such
equipment would come within the provisions of this section.
Subsection (b) further authorizes the Administrator to provide
automatic data processing equipment suitable for efficient and effec-
tive use by Federal agencies through purchase, lease, or transfer of
equipment between Federal agencies and other users, to require joint
use of equipment by two or more agencies or users, and to establish
equipment pools and data-processing centers when such action in his
opinion is necessary for the economical and efficient utilization of such
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14 AUTOMATIC DATA PROCESSING tQUIPMENT
equipment on a Government-wide basis, and to provide for mainte-
nance of such equipment. Subsections (a) and (b) are stated in the
broadest terms, outlining the outer periphery of the Administrator's
authority. The subsection empowers him to do whatever is necessary
to provide for the economical and efficient utilization of this equipment.
Subsection (b) further allows the Administrator to delegate author-
ity under this section when in his discretion such action is either
necessary for economy and efficiency of operations, or when such
action is essential to national defense or security. Solely on an
interim basis, until the beginning of fiscal year 1966, the Adminis-
trator 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 centralized utilization program.
The term "Federal agencies" as used in this section 111, is defined
in the Property Act to which H.R. 5171 is an amendment. The
term extends to "any executive agency or any establishment in the
legislative or judicial branch of the Government (except the Senate,
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 limitations
to be used to finance expenses incident to the acquisition, mainte-
nance, and administration of the Government-wide data processing
program provided for in this section. Such expenses include those
incurred for personnel, services, purchases, rentals, maintenance and
repair, as well as other related costs, including the cost of adminis-
tering the program. Through the use of this fund the Administrator,
following receipt of advice of agency requirements and appropriate
evaluations as to the availability of currently held equipment, would,
when necessary, purchase equipment through use of capital in the
fund, or if more advantageous, lease equipment through use of such
funds.
In either event, the user agency would reimburse the Administrator
for the use of the equipment on an annual basis in sums as determined
Under subsection (d). Annual 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 necessm-y to meet these annual 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 utilization of such equipment and therefore increases in pur-
chases), the Administrator would make requests in the budget of the
General Services Administration for operating capital to be placed in
the revolving fund. Subsection (c) specifically provides that a report
of receipts, disbursements, and transfers irom the fund shall be made
annually in connection with the budget estimates to the Director of
the Bureau of the Budget and to the Congress. Incident to these
reports, general estimates of expected expenditures for the next fiscal
year would be furnished the Appropriations and other congressional
committees upon request as a further assurance of congressional
control and supervision of this program. Any substantial deviations
from these estimated expenditures could be called to the attention of
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15
Appropriations Committees on a prospective basis, should these
committees consider such action necessary.
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 funds of any agency, organization,
or contractor utilizing or receiving services from equipment. Rates
for use of the equipment or for services received therefrom are to be
fixed by the Administrator so as to approximate the cost charged to
the fund, including depreciation and accrued leave, the amortization
of installation costs, as well as other items of expense recognized and
acceptable from the standpoint of sound accounting practices.
Prior to fiscal year 1966, it is contemplated that appropriations may
be provided for certain direct operating costs. Provision is made in
subsection (d) to avoid inclusion of such items in the determination
of the rates charged user agencies.
Finally, refunds or recoveries resulting from operations, such as
net proceeds of disposal of fund 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 covered into the
Treasury as miscellaneous 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 Ad-
ministrative Services Act of 1949, and specifically, the proviso to
section 201(a) extending certain authority to the Secretary of Defense
to exempt the National Military Establishment from provisions of
the Property Act, as well as provisions of section 602(d), granting
exemptions to the Atomic Energy Commission, TVA, and others.
AGENCY COMMENTS
In response to requests for comments on H.R. 5171, the committee
received replies from the Comptroller General of the United States,
the Administrator of General Services, the Department of the Treas-
ury, and the Bureau of the Budget which transmitted comments
received from the Departments of Defense, Agriculture, Labor, and
Post Office, as well as the Tennessee Valley Authority, the Atomic
Energy Commigsion, and the Federal Aviation Agency.
The Comptroller General favors enactment of H.R. 5171
Subject to certain amendments, most of which the committee has
adopted, the Comptroller General strongly endorses H.R. 5171. In
his comments on this bill he stated, in part:
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
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1(5 AUTOMATIC DATA PROCESSING EQUIPMENT
utilization of EDP equipment. Accordinly, we recom-
mended to the President of the United States that he estab-
lish such an office in his organization. We are of the opinion
that overall policy guidance and direction of the Govern-
ment'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
Government. However, we recognize that there are various
ways in which central control can be exercised over the
procurements and utilization of this type of equipment.
H.R. 5171 provides such an alternate method. We are not
opposed to the method set forth in H.R. 5171; however, we
feel that the mechanism proposed in H.R. 5171 for carrying
out the detailed operations of coordination and control needs
to be subject to the policy guidance and overall direction of
the Oflice of the President.
We believe the enactment of the bill would be in the
interest of the Government and will result in considerably
more economical procurement and utilization of electronic
data processing equipment. Therefore, and subject to the
changes suggested above, we favor enactment of the proposed
legislation."
The Administrator of General Services recommends enactment of H.R.
5171
In his report on H.R. 5171 submitted to the committee he stated:
In order to achieve for the Government the full use poten-
tial of automatic data processing equipment, the require-
ments for which have shown stupendous growth during
recent years, to assure full coordination of procurement by
and use within Government, and to obtain for the Govern-
ment the most economical cost possible, it is essential that
centralized management and control over the procurement
and use of all such equipment be established. We believe
that GSA is not only the logical but the appropriate agency
to provide such a central management for the Government.
Provision of this service for all Federal agencies by GSA
would be consistent with the declared purpose of the Con-
gress in creating GSA to provide for the Government an
economical and efficient system of procurement of personal
property and non personal services, including related services
such as contracting, the utilization of available property, the
disposal of surplus property and records management. The
utilization of automatic data processing equipment has
become so vital to the successful performance of these and
many other functions of Government that they no longer
can be successfully handled without the use of such equip-
ment.
Accordingly, GSA wholeheartedly endorses H.R. 5171 and
urges its early enactment by the Congress."
14 Id.
u Cf. footnote 5, supra.
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The Bureau of the Budget's position reflects the opposition of some user
agencies to adoption of this more effective and efficient centralized
management system
In commenting on H.R. 5171, an Assistant Director for Legislative
Reference of the Bureau of the Budget advised the committee:
We understand that a major purpose of the proposed bill
is to correct the lease versus purchase situation described by
the Comptroller General in his March 1963 report which he
based on agency plans for fiscal year 1963. Agency plans
for fiscal year 1964, the first effective year for Bureau of the
Budget Circular A-54, differ significantly from those for the
prior year. In the civil agencies 64 percent of all new ADP
acquisitions will either be purchased or, for better budget
timing, will be leased with an option to purchase in fiscal
year 1965. Additionally, the civil agencies will purchase 18
presently leased computers .in fiscal year 1964. Purchase
policies and plans for the military departments currently are
being reviewed in the Office of the Secretary of Defense.
This trend toward purchasing new ADP equipment and
purchasing equipment currently leased, creates the necessity
for designing procedures for utilizing Government-owned
equipment when it is no longer suitable for use by the
acquiring agency. However, the General Services Admin-
istration is making satisfactory progress within its present
statutory authority in the development of regulations for the
effective utilization of this ADP equipment as well as for
taking advantage of the Government's equity tn leased
- computers.
In the hope that it will be helpful to the committee, we
plan to furnish to you in a few days a r?m?f the ADP
program of the executive branch, indicating its current status
and future objectives. This r?m?ill also describe the
wide range of activities, involving the GSA and other
agencies, occasioned largely by the fact that the management
of our ADP equipment resources is integral to program man-
agement in an agency and thus cannot be viewed in the same
light as office space, typewriters, or automobiles.
In the circumstances, and for reasons outlined in the views
letters of the Departments of Defense, Agriculture, Labor,
and Post Office, and the Atomic Energy Commission, Federal
Aviation Agency, and Tennessee Valley Authority trans-
mitted herewith, the Bureau of the Budget does not favor
enactment of H.R. 5171 in its present form. While we do
not believe additional legislative authority is necessary, we
will be glad to work with the committee and with other
agencies concerned to develop amended or substitute legisla-
tion which might assist in the more effective use of automatic
data processing equipment without creating the problems
which we believe are inherent in this bill."
A review of the agency comments accompanying the Bureau of the
Budget report indicates that opposition to H.R. 5171 may center upon
Letter of Phillip S. Hughes, Assistant Director for Legislative Reference, Bureau of the Budget, to
William L. Dawson, chairman, House Committee on Government Operations, dated May 27, 1963. Of.
Hearing (app. I10.)
H. Rept. 428,88-1-3
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18 AUTOMATIC DATA PROCESSING EQUIPMENT
a misinterpretation as to the extent of the Administrator's authority
under this proposal. As this committee has emphasized, the various
agencies and other users would determine their individual require-
Ments and could use the equipment and ADP capacity made available
to them for whatever purpose they may select. The Administrator's
interest in the equipment, once it was in the possession of an agency
or user, would be.limited to making provisions for the maintenance
of the equipment and for assuring its maximum utilization on a
Government-wide basis. His efforts would constitute a service rather
than a hindrance to agencies and other users, relieving them of many
responsibilities which they have not been able to perform efficiently
in the past.
On the other hand, the letters also suggest opposition to a
Government-wide effort to increase the utilization of equipment now
on hand and to provide for a more economical acquisition program.
Of course, opposition of this sort is a good indication as to the need
for H.R. 5171.
H.R. 5171 is necessary
In a report issued June 27, 1958, the Comptroller General stated
that:
At,the present time no single agency of the Government is
responsible for directing and coordinating continuing develop-
ments in automatic data processing. On the other hand,
several agencies have responsibilities which have a bearing on
electronic systems and procedures. Accordingly, the prin-
cipal recommendation in our report is concerned with the
need to establish an effective and coordinated program of
joint effort by the interested agencies of the Government.'7
Pursuant to this recommendation, various interagency groups were
established in the Government and, on March 18, 1960, the Bureau
of the Budget issued Budget Bulletin No. 60-6, entitled, "Automatic
Data Processing (ADP) Program of the Executive Branch: Studies
Preceding Acquisition of ADP Equipment."
In a further review of Government automatic data processing prac-
tices of December 30, 1960, the Comptroller General reiterated his
1958 recommendations. In a December 30, 1960, report, he stated:
We believe that a mechanism should be established in the
Government to provide the necessary arrangements whereby
the procurement, and transfer of data processing equipment
between Government activities should be fully coordinated
so as to keep costs as low, as possible consistent with obtain-
ing needed processing facilities.
Subsequently, the Bureau of the Budget, in October 1961, issued
Circular No. A-54, which prescribed policies on the selection and
acquisition of ADP equipment to be observed by Federal agencies
and contractors operating Government-owned facilities. One of the
principal objectives of this bulletin was to foster the purchase of
ADP equipment by Federal agencies when it was economical to do
SO.
I! Prefatory letter of Comptroller General accompanying GAO Report, "Survey of Progress and Trend
of Development and Use of Automatic Data Processing in Business and Management Control Systems of
the Federal Government as of December 1957," (June 1958).
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'In the Comptroller General's March 6,.1963, report, he took cogni,
zance of the efforts which had been undertaken by the Bureau of the
Budget and others, and concluded that: ?
We are aware of no .significant program toward .effec-
tive, coordinated mechanism in the Federal Government for
achieving the interrelated objectives cited '8
that is, optimum utilization and 'efficient .acquisition.'9
There is no trend toward increased purchase
The Bureau of the Budget's Assistant Director for Legislative
Reference suggests in his letter that:
This trend toward purchasing new ADP equipment and
purchasing equipment currently leased creates the necessity
for designing procedures for utilizing Government-owned
equipment when it is no longer suitable for use by the
acquiring agency.2?
In response to this comment as to a "trend" toward purchasing, the
Bureau of the Budget was contacted regarding the number and the
percentages of computer systems to be acquired by civilian agencies
during the fiscal year 1964. The information was furnished that
93 systems would be. acquired, 36 of which would be purchased, 35
which would be leased, and 22 which would be leased with a specific
option to purchase within 2 years. In regard to the Department of
Defense, the committee reviewed copies of the lease and purchase
data prepared by the Department for inclusion in. the Bureau of the
Budget annual inventory of ADP equipment. This inventory shows
that the Department of Defense had on hand 667 computer systems
at the close of fiscal year 1962, and plans to have S07 at the close of
fiscal year 1963, and 1,077 by the end of fiscal year 1964.
The number of systems leased and purchased by the Department
of Defense- are shown in the following tabulation:
Close of fiscal year
Leased
Purchased
Total
1962
1963
1964
578
698
067
89
109
110
667
807
1077
12 GOA report (March 1903), c.. footno, e 1, supra, 38.
18 The Assistant Directo. 01 the btu eau 0, the Budget also suggested in his etter that ADP equipment is
subject too' wide range o. activities" and for this reason zuggests that, it "cannot be viewed in tile same light
as office space, typewriters, o. automobiles." This statement in.eL that ADP equipment used in Govern-
ment is highly specialized in nature and designed to meet individual and unique requirements m user
agencies. This is not the case, as is indicatch rom the comment in the Comptroller General' March 6,
1963, report:
"With more than 1,600 systems now: in use (exclusive 0 certain military tactical, intelllgence, and surveil-
lance systems), the Federa, Goverihnent is tie world's ,argest user oi lectr sic dat- proces. ing equipment.
For the most part, the equipment L general purpose in nature; that is, it can be used to per,orm numerous
different kinds 01 tasks once programed to do so. Becaste 0. tee wide variety oi Government equipment
needs, most equipment iirtailed can be considered to be useful 1 o the extent that. if purchased and no longer
needed for its originahy intended purpose, it can be placed in use for other purposes in other activities.
"Government application range rom critical scientific aid defense operations to many less demanding
administrative functions.
? ? * ? ?
"In some cases, because 01 defense or other critical national needs, it is necessary to use the latest models
of equipment. However, most ADO' equipment is genei al purpose in nature and it could fulfil data process-
ing needs in less der?anding areas ihr a number of years after it has outlived its usefulness for the oiiginal
task."
n Cf. footnote 10, supra, ibid.
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, 20 , AUTOMATIC DATA PROCESSING EQUIPMENT
Based upon this information, the new civil procurements were
applied to the prior year's inventory of systems in civil, agencies,
giving effect to the currently leased systems which are to be'purchased
during fiscal year 1964. The result shows that while purchasing in
certain civil agencies may be somewhat improved, the Government-
wide percentage of purchased systems has remained just about the
same as in. prior years because of the preponderance of systems
leased in the Department of Defense.
The following is an updating of an analysis shown in the Comptroller
General's March 1963 report on purchasing versus leasing:
Number of
systems
Number
leased
Number
purchased
Percent
purchased
1960 actual
531
433
98
18.5
1961 actual
730
613
117
16.0
1962 estimated
1, 047
891
156
14. 8
1963 projected
1, 226
1035
191
15.6
1964 projected
1, 589
1, 343
246
15. 5
This analysis shows that at the close of fiscal year 1964 the Govern-
ment will have a percentage of purchased systems that is less than it
was at the close of fiscal year 1960, 4 years earlier at a time when the
Government had only one-third the number of systems projected as
being in use at the close of fiscal year 1964.
Agencies opposing H.R. 5171 do not have effective ADP utilization
programs
Following receipt of the Bureau of the Budget report forwarding the
comments of certain agencies opposing H.R. 5171, the committee
requested information as to the effectiveness of the ADP programs in
progress in these particular agencies. Not only do these agencies
lack effective programs providing for the full utilization of equipment
now on hand, but they are not in every instance complying with the
Comptroller General's equipment purchase recommendations. The
Federal Aviation Agency, as an example, plans to purchase equipment
with low utilization, and yet continue to lease other equipment which
is used from 600 to 700 hours per month. The Air Force, Navy, and
Army, and the Atomic Energy Commission have also selected low
utilization equipment for purchase at a time when other systems,
operating on a more substantial utilization basis, have remained
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under lease." In addition, these and other agencies have been subject
to serious criticism in a series of Comptroller General audit reports
over a period of more than 3 years for poor utilization practices which
can be remedied through an efficient centralized management program
as provided in H.R. 5171.2, ?
II The Air Force has purchased equipment in limited use, such as: Burroughs 204, with 141 hours per
month, Burroughs EBB, with 141 hours per month, National Cash Fteglster 102, with 156 hours per month,
and the Recomp II, with 170 hours per month, while it was leasing several IBM 7080 systems operating be-
tween 400 to 500 hours per month, and many IBM 1401 systems operating between 500 and 600 hours per
month.
The Army, Navy, and Atomic Energy Commission have also favored the purchase of limited use equip-
ment. Examples:
NAVY
Purchased
Leased
Model
Hours per
month
Model
Hours per
month
Bendix G15
Alwac 3
Burroughs E102
Royal LG 30
170
86
168
90
Univac Solid State-80
Burroughs 220
IBM 7080
IBM 1410
450
400
500
450
ARMY
Recomp II
100
Honeywell 800
500
Burroughs E102
100
Honeywell 400
375
Alwac 3
150
IBM 1401
528
Royal LG 30
wo
Burroughs 220
600
IBM 7080
408
ATOMIC ENERGY COMMISSION
CRC-102A.
40
Ph ilco 2000
550
Royal LG 30
96
Philco 2000
500
Honeywell 400
175
IBM 7090
500
IBM 1401
86
Burroughs E102
72
22 The following are examples of recent findings of the Comptroller General outlining poor utilization
practices on the part of various agencies:
1. Atomic Energy Commission, February 1963 (B-146763):
"Our review at Argonne National Laboratory disclosed that the Atomic Energy Commission could have
saved about $200,000 in rental costs had it purchased certain automatic data processing equipment in a more
timely manner.
? ? ? ? ? ? ?
"Our review at Midwestern Universities Research Association disclosed that, although Atomic Energy
Commission funds are, in effect, being used by the contractor to purchase certain automatic data processing
equipment, the Commission will not acquire title to the equipment. Also, payments for rental of the equip-
ment exceeded Midwestern's cost. ? * ? Our review of rental charges for certain other automatic data
processing equipment at Midwestern disclosed that the Atomic Energy Commission was not given credit
for prime shift time paid for by the Commission which was used for other than Commission work and from
which the contractor derived income. Also, the Commission was charged rental in excess of that actually
incurred by2Silidwestern."
2. Air Force, April 1963'(B-146732):
"Our review disclosed that about $1,300,000 will be expended unnecessarily by the end of 1963 because the
Air Force failed to take advantage of reduced sales prices offered by International Business Machines Corp.
Lu 1961 and Burroughs Corp. in 1962 for 14 electronic data processing systems which the Air Force leases."
3. Federal Aviation Agency, March 1963 (B-115369):
"The Federal Aviation Agency in December 1959, leased an IBM 704 system for use at Oklahoma City,
Okla., for use in the control of aircraft in flight and in the flight inspection of ground navigational aids.
Under the discounted pricing policy, components of this system renting for $23,400 per month and origin-
ally priced at $1,116,800 became available for purchase for $335,000. The Agency decided not to buy this
system, however.
"Had these components been purchased in December 1960, the Government would have saved $87,500
through June 1962 and would be adding to these savings at the rate of $21,800 for each month of use after
that date. These estimates of savings take into consideration the cost of maintaining purchased equipment
under a manufacturer's maintenance service contract.
"In this case, if the Federal Aviation Agency had purchased rather than continued to lease the com-
ponents subject to the discount prices, it would have saved $349,000 through June 1963, the anticipated
replacement date. At that time, the Government would own the equipment and could relocate it in a
less critical area in place of other leased equipment and this procedure would create additional monthly
savings to the extent that the rental of the replaced equipment would exceed the cost of maintaining the
Government-owned equipment."
4. Commerce Department, Apr. 17, 1963 (13-114821):
"The Department of Commerce approved the replacement of rented automatic data processing equip-
ment used by the ,,Bureau's Boulder Laboratories without adequately considering the potential savings
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22 AUTOMATIC DATA PROCESSING EQUIPMENT
AGENCY REPORTS ON H.R. 5171
The agency reports and comments received on H.R. 5171 follow:
COMPTROLLER GENERAL, OF THE UNITED STATES,
Washington, D.C., May 15, 1963.
Hon. WILLIAM L. DAWSON,
Chairman, Committee on Government Operations,
House of Representatives.
DEAR Mn. CHAIRMAN: Reference is made to your letter of April 1,
1963, acknowledged April 2, and letter of May 3 from the chairman of
your Government Activities Subcommittee, requesting our comments
on H.R. 5171.
The bill would amend title I of die Federal Property and Adminis-
trative Services Act of 1949, as amended; 5 U.S.C. 630-630g-1 (supp.
IV), by adding a new section 111 which would grant authority to
' the Administrator of General Services to coordinate and control the
purchase, lease, maintenance, and use of electronic -data-processing
equipment by Federal agencies, and to, operate or provide for the
operation of such equipment by delegation of authority or otherwise.
In carrying out his responsibilities under this section, the Admin-
istrator is authorized to provide electronic data-processing equipment
suitable for efficient and effective use by Federal agencies through
purchase, lease, transfer of equipment from other Federal agencies
or otherwise, and to provide for the maintenance and repair thereof
that could have been realixed by exercising a Bureau option to:purchase the equipment for possible use
within the Department or by other Government agencies; rental costs of more than $400,000 on the replaced
equipment could have been applied toward the purchase price of that equipment, on behalf of a Government
ogeney needing the equipment." ? .
. 5. Post Office Department, January 1962 (13-133385):
? ?
. ?
"The installation and use of different systems for 'processing similar financial and related clota without
appropriate independent studies having been made by the Department -resulted in unnecessary costs
and problems.
' ? ? ? ? *
? .
.. . .
"The Department ineutted considerable rental costs in eiperimenting with ADP machines at these loca-
tions, for example, at the New York and Chicago offices about 8400,000 and 882,000, respectively, and at the
. San Francisco office about $87,000." . . . . . ,
. .
. ,
. .
; . 6. Treasury Department, April 1962 (B=133180): . . .
'
We believe that operating costs can be reduced by Using. autoniatie data processing equiPment more
efficiently and by releasing unneeded equipment from rental contracts. Subsequent to our review of
machine utilization records, excess equipment renting for $11,660 annually was released from the contract.
, We believe that additional equipment can be released with further annual reductions of about 613,600 in
machine rentals and $8,800 in personnel costs." .
: 7. Defense Department, June 1962 (B=146732): , . ...
.: "We identified overpayments, of rental charges, amounting to iffiout $257,000, made by the military
:services to manufacturers of automatic data processing (A DP) equipment, during fiScal years 1960 and 1961,
because the terms of ADP contracts awarded by the General ServiceS Administration (GSA) Were not
. properly administered. Since our review covered only-32 percent of the military organizations which lease
ADP equipment under GSA contracts, we conclude that other overpayments may have been made in
addition to the $208,000 found in our review."
8. Civil and defense agencies, June 1962. (13-146732): . .
"During out review, we noted that the Federal supply schedule contracts were frequently awarded
months after the previous year's contracts had?expired. The fiscal. year i1960 contracts..contained several
important contract changes which entailed adjustments of rental records. ? .W found that a number of
, ei vil and defense using ?agencies had not made rental adjustments required 'by the contract changes.
After we called this matter to the attention of responsible agency officials, they recovered, -Or instituted
action to recover, rental fees totaling $122,000. ' - : ? .
"Also, it has come to our attention that overpayments are being made.because' of poor recOrdkeeping pro-
cedures in the agencies with regard to recording equipment utilization information that is subsequently
, used to pay rental charges to equipment suppliers. In one instance, at a Government EDP facility, time
recording meters were attached to the machines and this more accurate recording Of time resulted it a re-
. duction in equipment rental of approximately $10,000 per month- at that location. Also, we have learned
that these meters are being used successfully at several industrial facilities in. private industry. It appears
possible that where rental equipment is being used extensively, rental charges can be drastically reduced
through use of these accurate time recording devices. Also, good management of this equipment Calls for
accurate knowledge of time spent by project, so that management personnel can determine with some sem-
blance of reliability the cost of operating the various projects under-their Cognizance. ? . ?
"A complete listing of Comptroller General audit reports on .ADP IsSued since 'June 1958 apPears on P. 9
of the bearing."
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AUTOMATIC DATA PROCESSING EQUIPMENT 23
. ..
by contract or otherwise. The Administrator, is further authorized
to transfer such equipment between Federal agencies, to require.joint
Utilization thereof -by two or more Federal agencies, and to establish
equiPment pools and data-processing c.enters for such, joint use when;
necessary for its most efficient and effective, utilization. The Admin-
istrator, in his discretion, may delegateauthority to lease, ,purchase,
maintain, or Operate(1) general Classes of equipment, (2) equipment
of special design needed to fulfill some unique. requirement or special,
purpose of a particular Federal agency, and -(3)- equipment -necessary
for national defense and seCurity. ? ., .
The bill would .estahlish ?an electronic data-processing fund, without,
fiscal year limitation, which would be used to .finance .the, ad min is tra7,'
tive expenses and, costs incident to. the 'procurement and ptilization,
of electronic data7pfocessing 'equipment p his revolvingfund would,
4
be financed. primarily from advances and reimbursements from avail--
able appropriations and funds ofany ,agency (inClnding.thegenerali
Services Administration),, organiz,ation, or: persons ,utilizing such,
equipment and services rendered, to them, at ..rates .determined l)y the.
AdininiStrator to approximate the costs. ? thereof.. .. The capital of the,
fund would .consist of appTopriatio.4,a,S,inay be required,togeher with
the value, as ,?determined - by - the Administrator, .. of .supplies . wid;
equipment transferred to he ?Adinioistrator, less any liabilities. assumed
on. Account thereof. ? - . .'.-,-' . . . . ? . .
. ?
In our report to the Congress dated -6; AO, (IA7115359), on ,
the "Finandial Advantages of Piirchaging 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 .recommended
to the 'President of the ilnited.States?that he establish such anoffice;
in his orgariiiation..- , We are of the opinion that overall policy guidance .
and direction Of the GOverhinent'S data-Processing programs, can be ,
most effectively' Accomplished through, the efforts of a small, highly
placed central manageinent office.' ip .the executive branch of the.
Government. However, .we recognize th.at there tire various ways, in ,
which central Control' can, be 'exercised over .the _procurement and .
utilization of this . type of equipment. - .H.It. 5171 provides. puch an"
alternate method. ' -We are. not opposed to th,e. method.set forth. in
H.E. 5171; .however,- we feel that the mechanism proposed .in -HI. ,
51/1 for carrying out the detailed operatio,Us of coordination and cop- .
trol needs to be subject to the policy guidance -and overall direction of ,
the office of the. President.' . ' . , . ?
With reference to the policies . and procedureS.Set forth in the bill
We offer' the following comments I or.conSideration. -? ,.. ? ? ? : ,,
. .. . . ? .
1. We 'Suggest ? that the Word "electronic" as used in. the , bill , be.,
deleted and the word "automatic" be substituted therefor in order to.,
pIaCe?-a wider range of equipment within the scope of authority of the ,
General Services Administration: '' ' ' , , , ' . , . ?
2. The ProVisionsof H.R. 5171 limit by the General Services
? .. . , ? ? - . _ .
Administration Over in-house Government electronic .data-processing I
equipment.' We believe that; to -the thaximum extent practicable,
such equipment or systems required by contractors in the performance
of negotiated contracts with the Federal agencies where the whole or
'
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J1jviiit, DA1A PROCESSING EQUIPMENT
a substantial part of the cost of such equipment or systems would
become a part of Government contract prices should likewise be fur-
nished by the Government with title or leasehold interest remaining
in the Government subject substantially to the same laws and regu-
lations applicable to in-house Government equipment.
3. The bill proposes to establish an electronic data-processing fund
for carrying out the functions enumerated therein to be "available
without fiscal year limitation." This method of financing, not re-
quiring annual congressional authorization?as compared with budg-
etary and appropriation processes followed in financing activities
through annual appropriations?would materially diminish con-
gressional control over such activities and should not be permitted in
the absence of justifiable need therefor. It is our opinion that an an-
nual congressional review of operations under the fund and affirmative
annual congressional authority in respect of the availability of the fund
is necessary to place the activities of the General Services Adminis-
tration in this area under complete congressional control. Conse-
quently, we suggest that after the word 'limitation" appearing on
page 2, line 24, there be added "within such amounts as may be pro-
vided annually in appropriation acts."
4. We suggest that, after a date determined upon, 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, lease, or installation of automatic
data-processing equipment of the types taken over by the Admin-
istrator.
5. It is our opinion that no executive agency should be exempted
from the provisions of the bill except under extraordinary circum-
stances.
6. We note the terms "organization, or persons" appearing on page
3, line 14 of the bill. If by use of these terms it be intended to author-
ize the Administrator to make equipment available for, or otherwise
supply services to, private organizations or persons, which would con-
stitute an exception to section 3678, Revised Statutes, 31 United States
Code 628, requiring the application of appropriations solely to the
objects for which made and no other, in the absence of specific author-
ity to the contrary, then adding the word "private" before the word
"organization" would obviate any doubt in the matter.
7. In order to carry out the policy expressed in the bill with refer-
ence to the purchase, lease, maintenance, and utilization of electronic
data-processing equipment, we suggest that the President be required
to issue regulations to provide for adequate notice to affected agencies,
and to assure each such agency independent review of the Adminis-
trator's determination in the event of disagreement with the Admin-
istrator concerning such determinations. Similarly, the Adminis-
trator of General Services should be authorized to prescribe regula-
tions to effectuate his functions under the bill subject, of course, to the
regulations issued by the President thereunder.
We believe the enactment of the bill would be in the interest of the
Government and will result in considerably more economical procure-
ment and utilization of electronic data-processing equipment. There-
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25
fore, and subject to the changes suggested above, we favor enactment
of the proposed legislation. If we can be of any further assistance in
this matter please advise us.
Sincerely yours,
JOSEPH CAMPBELL,
Comptroller General of the United States.
GENERAL SERVICES ADMINISTRATION,
Washington, D.C., May 27, 1963.
Hon. WILLIAM L. DA1VSON,
Chairman, Committee on Government Operations,
House of Representatives,
Washington, D.C.
DEAR MR. CHAIRMAN: Your letter of April 1, 1963, requested the
views of the General Services Administration on H.R. 5171, 88th
Congress, a bill to authorize the Administrator of the General Services
Administration to coordinate and otherwise provide for the economic
and efficient purchase, lease, maintenance, operation, and utilization
of electronic data-processing pquipment by Federal departments and
agencies.
The bill would add a new section 111 to title I of the Federal
Property and Administrative Services Act of 1949, as amended (5
U.S.C. 630), which would centralize GSA control over all electronic
data-processing equipment required by Federal agencies. Financing
would be provided by a revolving fund established by the section.
Original capitalization of the fund would be by appropriation and
transfer of assets, Which would be reimbursed through user charges.
According to a report of the Comptroller General to the Congress,
dated March 6, 1963, entitled "Study of Financial Advantages of
Purchasing Over Leasing of Electronic Data-Processing Equipment
in the Federal Government," there would be very substantial savings
to the Government if it purchased more of its requirements for electronic
computers instead of leasing as was the case with respect to 86 percent of
Federal requirements in the fiscal year 1962. The report recites, as an
example, that if 523 of the approximately 1,000 electronic data-process-
ing systems installed or planned for installation in the Government on a
lease basis by the end of fiscal year 1963 were purchased instead,
potential savings would be about $148 million over a 5-year period
and over $100 million annually thereafter. The Comptroller General's
report concludes that "the only practical way in which the kind of
coordinated management can be practiced to achieve the possible
financial savings cited is through the establishment of a small, highly
placed central management office in the executive branch of the
Government."
In order to achieve for the Government the full use potential of
automatic data-processing equipment, the requirements for which
have shown stupendous growth during recent years, to assure full
coordination of procurement by and use within Government, and to
obtain for the Government the most economical cost possible, it is
essential that centralized management and control over the procure-
ment and use of all such equipment be established. We believe that
GSA is not only the logical but the appropriate agency to provide such
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a central management for the Government. Provision of this service
for all Federal agencies by GSA would be consistent with the declared
purpose of the Congress in creating GSA to provide for the Govern-
ment an economical and efficient system of procurement of personal
property and nonpersonal services, including related services such as
contracting, the utilization of available property, the disposal of
'surplus property and records management. The utilization of auto-
matic data-processing equipment haslecome so vital to the successful
performance of these and many other functions of Government that
they no longer can be successfully handled without the use of such
equipment. . . . .
As the volume of Government transactions required to be handled
continues to grow during the ensuing years and as automatic data-
processing equipment becomes more technologically sophisticated, its
potential for even greater application in the transaction of Govern-
ment business affords the principal means by which the ever-increasing
volume of Government business may be successfully carried out with-
out proportionate increases in staff costs. At the same time it must
be recognized that government utilization of such equipment either
as owner or lessee entails substantial costs..
Accordingly, to achieve for the Government the maximum economic
benefits from the use of such equipment, it is highly desirable that
prompt action be taken to assure (1) proper. economic evaluation of
such equipment now in use and proposed in the future; (2) maximum
utilization of all such equipment owned or leased by the United States
including arrangements for multiple agency use; and (3) that the total
Government requirements for such equipment is fully brought to bear,
both as to price and terms, in .negotiating contracts with manufac-
turers for its use through purchase, lease, or other arrangements.
In our judgment the many related purposes can best be achieved
through centralization of coordination and control of all aspects of the
matter in a single agency,
GSA is an organization already existing within Government which
possesses considerable know-how in this complex field and into which
pool equipment operations and available personnel that may now be
fragmented throughout Government can be integrated to the extent
necessary to provide for the Government an efficient and economical
system for the purchase, lease, maintenance, and use of electronic
data-processing equipment. Provision of this centralized service
by GSA would, as previously pointed out, be consistent with the
purposes for which GSA was created.
We suggest that the word "electronic" wherever it appears in the
-bill be changed to read "automatic." This change is regarded as
desirable to make it absolutely clear that the authority of GSA
would extend to complete data-processing systems which may include
electronic computers as well as such related items as punchcard
equipment and tabulating machines, which, while a part of the system,
may not technically be within the term "electronic.
We recommend, also, elimination of the following language which
appears to have been adopted in the proposed bill from the provisions
of section 110 of the act and which has no application to automatic
data-processing equipment:
Page 3, line 10, "less any liabilities assumed";
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Page 3, lines 18 and 19, "where appropriate ? for terminal liability
changes".
. . We construe the authority which would be vested in the Adminis-
trator by the first sentence of proposed new section 111 to "control
the purchase, lease, maintenance, and use" of automatic data-proc-
.essing equipment by Federal agencies as broad enough to authorize
the exercise of such coordination and control through issuance of
appropriate regulations applicable not only to such equipment owned
:or leased by and in the possession of Federal agencies but also to use or
services of such equipment in the possession of others and obtained
by contract or other arrangement. Costs incurred by cost-type
contractors for acquisition by purchase, lease, contract, or otherwise
. of automatic data-processing equipment or the use thereof required
for the performance of such contracts, are costs which are reimburs-
able by Federal agencies under the terms of such contracts: This
constitutes an area of indirect Government utilization of such equip-
ment involving, so we understand, substantial cost to the United
States. To remove any question as to whether the proposed au-
thority of the Administrator to coordinate and control the purchase,
lease, maintenance, and use of automatic data-processing equipment
.encompasses such actions by cost-type contractors where theexpense
is passed .to the United States through reimbursement, it is reconi-
mended that the words "or at the expense of" be inSerted in line '8,
.page 1, between the words "by" and "Federal.". -
The budgetary requirements of GSA resulting from enactment of
this legislation would be increased to the extent of'-capital appropria-
tions to the .revolving.fund for the purchase and lease of automatic
data-processing equipment and services. - Administrative and ?staff
costs would be recovered through -rental . charges from the agencies
using equipment owned by .or leased through the fund.
Accordingly, GSA wholeheartedly endorses H.R. 5171 and urges its
early enactment by the Congress.
The Bureau of the Budget has advised-that, while there is no objec-
tion .to the presentation to your committee of such report as we deem
appropriate on H.R. 5171, other affected agencies have ?expressed
serious concern about certain effects of the bill. -Further, that the
Bureau of the Budget generally shares these concerns and, accordingly,
in its separate .report on the legislation, opposes the bill's favorable
consideration in its present form. .
Sincerely yours,
BERNARD L. BOTJTIN, Administrator.
TREASURY DEPARTMENT,
Washington, D.C., May 27, 1963.
Hon. WILLIAM L. DAWSON,
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. 5171, to authorize the Adminis-
trator of the General Services Administration to coordinate and
otherwise provide for the economic and efficient purchase, lease,
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28 AUTOMATIC DATA PROCESSING EQUIPMENT
maintenance, operation, and utilization of electronic data processing
equipment by Federal departments and agencies.
The proposed legislation would vest in the Administrator of General
Services all authority to coordinate and control the purchase, lease,
maintenance, and use of all electronic data processing equipment by
Federal agencies, and to operate or provide for the operation of such
equipment.
Five bureaus of the Treasury Department own or lease a substantial
number of computers and related peripheral equipment. They serve
a variety of purposes including accounting for and maintaining the
issue and retirement records on savings bonds; collection of revenue;
compiling statistics on income; plotting courses for search? and rescue;
supply, fiscal and personnel management; and issuance, payment, and
reconciliation of checks. In each instance, the machine was specifi-
cally designed or adapted to the function which it performs. Fur-
thermore, personnel operating the equipment require special training.
The Department has given great emphasis to achieving the most
efficient utilization of the equipment and of the trained personnel.
In addition to making the fullest use required by Treasury operations,
the Department permits other Government agencies to use the equip-
ment in periods when it is not required for Treasury programs. We
also handle, on a reimbursable basis, the accounting and reconciliation
of the money order system of the Post Office. However, the principal
use of, and need for, the equipment remain the responsibility of the
'Treasury Department. The proposed legislation, by entralizing
control of EDP equipment in a single agency, would separate the
control of the equipment from the agency having the responsibility
for the program for which the equipment was specifically designed.
The Treasury Department believes that this would be contrary to
good managerial practice and to efficient administration.
As for the centralized maintenance of the equipment, the Depart-
ment's experience indicates that it would cost more for Treasury to,
maintain the equipment that it would cost the supplier to furnish
maintenance. Centralized maintenance should not, therefore, be
undertaken unless it is clearly demonstrated that on a Government-
wide basis it would be more economical than present arrangements.
Insofar as the centralized procurement of electronic data-processing
equipment is concerned, the proposed legislation would be unnecessary
since the General Services Administration already has authority to do
this. At the present time, the General Services Administration
negotiates terms and conditions of computer contracts with suppliers
of equipment, but the prices are set by the supplier and procurement
actions are directly between the departments and agencies and the
suppliers.
In view of the above, the Treasury Depahment would be opposed
to the enactment of the proposed legislation.
The Department has been advised by the Bureau of the Budget
that there is no objection from the standpoint of the administration's
program to the submission of this report to your committee.
Sincerely yours,
G. D'ANDELOT BELIN, General Counsel.
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EXECUTIVE OFFICE OF THE PRESIDENT,
BUREAU OF THE BUDGET,
Washington, D.C., May 27, 1963.
HOD. WILLIAM L. DAWSON,
Chairman, Committee on Government Operations, House of Representa-
tives, Longworth House Office Building, Washington, D.C.
DEAR MR. CHAIRMAN: This is in response to your request for a
report on H.R. 5171, a bill to authorize the Administrator of the
General Services Administration to coordinate and otherwise provide
for the economic and efficient purchase, lease, maintenance, operation,
and utilization of electronic data-processing equipment by Federal
departments and agencies. The following is submitted in response
to your request.
We understand that a major purpose of the proposed bill is to correct
the lease versus purchase situation described by the Comptroller
General in his March 1963 report which he based on agency plans
for fiscal year 1963. Agency plans for fiscal year 1964, the first
effective year for Bureau of the Budget Circular A-54, differ signifi-
cantly from those for the prior year. In the civil agencies 64 percent
of all new ADP acquisitions will either be purchased or, for better
budget timing, will be leased with an option to purchase in fiscal year
1965. Additionally, the civil agencies will purchase 18 presently
leased computers in fiscal year 1964. Purchase policies and plans
for the military departments currently are being reviewed in the
Office of the Secretary of Defense.
This trend toward purchasing new ADP equipment and purchasing
equipment currently leased, creates the necessity for designing pro-
cedures for utilizing Government-owned equipment when it is no
longer suitable for use by the acquiring agency. However, the
General Services Administration is making satisfactory progress
within its present statutory authority in the development of regula-
tions for the effective utilization of this ADP equipment as well as
for taking advantage of the Government's equity in leased computers.
In the hope that it will be helpful to the committee, we plan to
furnish to you in a few days a rc'i.sume, of the ADP program of the
executive branch, indicating its current status and future objectives.
This r?m?ill also describe the wide range of activities, involving
the GSA and other agencies, occasioned largely by the fact that the
management of our ADP equipment resources is integral to program
management in an agency and thus cannot be viewed in the same light
as office space, typewriters, or automobiles.
In the circumstances, and for reasons outlined in the views letters
of the Departments of Defense, Agriculture, Labor, and Post Office,
and the Atomic Energy Commission, Federal Aviation Agency, and
Tennessee Valley Authority transmitted herewith, the Bureau of the
Budget does not favor enactment of H.R. 5171 in its present form.
While we do .not believe additional legislative authority is necessary,
we will be glad to work with the committee and with other agencies
concerned to develop amended or substitute legislation which might
assist in the more effective use of automatic data-processing equip-
ment without creating the problems which we believe are inherent
in this bill.
Sincerely yours,
29
PHILLIP S. HUGHES
Enclosures. Assistant Director for Legislative Reference.
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TENNESSEE VALLEY AUTHORITY,
OFFICE OF THE BOARD OF DIRECTORS,
Knoxville, Tenn., April 30, 1963. ,
Mr. PHILLIP S. HUGHES,
Assistant Director for Legislative Reference,
Bureau of the Budget,
Washington, D.C.
DEAR MR. HUGHES: This is in response to your legislative referral
memorandum of April 10, requesting our views with respect to H.R.
5171, a bill to authorize the Administrator of the General Services
Administration to coordinate and otherwise provide for the economic
and efficient purchase, lease, maintenance, operation, and utilization
of electronic data-processing equipment by Federal departments and
agencies.
The bill would add a new section to the Federal Property and Ad-
ministrative Services Act authorizing and directing the General
Services Administration to coordinate and control the purchase, lease,
maintenance, and use of electronic data-processing equipment by
Federal agencies and to operate such equipment or provide for its
operation by delegation of authority. The objectives of centralizing
such control in GSA, according to the sponsor of the bill, are (1) greater
economy in the acquisition of EDP equipment, mainly through pur-
chase thereof in lieu of long-term rental arrangements, and (2) more
effective use of such equipment through coordination among the
various agencies of the Government.
These are worthwhile objectives with which we, of course, are in
accord, but We do not believe additional legislation such as that pro-
posed in H.R. 5171 is necessary to achieve them. In our opinion, the.
desired economy and efficiency can be obtained through voluntary
action by the various Government agencies if the Congress and the
administration provide the needed encouragement and funds. More-
over, we are concerned that such centralized control of EDP equip-
ment in GSA might hinder Federal agencies in their use of what has
been found to be an important tool in efficient administration and
businesslike management.
It should be kept in mind that this equipment is not just another
item of office equipment which falls within the recognized scope of
GSA's Government housekeeping activities. More and more uses
are being found for EDP equipment in carrying out Government
programs, particularly in the case of an agency such as TVA which
conducts extensive engineering and business-type activities. TVA
has found EDP equipment of immense benefit in carrying out its
program of regional development, such as in predicting and control-
ling the flow of the Tennessee River, in operation of its extensive
power system, and in production of fertilizer materials. We believe
TVA, which has responsibility for the success of these activities, is
in a much better position to determine how and what items of EDP
equipment can be used most effectively therein than any central
agency operating out of Washington and without such responsibility
would be. Actually, as far as these programs of TVA are concerned,
they would not appear to be affected by the provisions of H.R. 5171
since the bill does not alter the existing exemptions under section
602(d) of the Federal Property and Administrative Services Act, but
we believe that remote, centralized control of such vital equipment as
applied to any agencies is wrong in principle and should be avoided.
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' TVA has 'given. careful attention to economy and efficiency in its,
acquisition and use of EDP equipment. TVA first acquired an IBM-
704 machine several years ago under lease but it was purchased out-
right as soon as we could determine that it met our needs. Smaller
units of EDP equipment have been temporarily leased for special use.
but these will be replaced with purchased 'equipment as soon as we.
can determine with greater preciseness what we need. Also, we have.
made our EDP equipment available to AEC and other Government.
agencies when they need it and it can be spared. We see no reason
why similar cooperative action should not be taken throughout the
Government without additional legislation on the ? subject:
We appreciate the opportunity to comment on the bill.
Sincerely yours,
AUBREY J. WAGNER, Chairman.
FEDERAL AVIATION AGENCY,
Washington, D.C., May 10, 1963.
Mr. PHILLIP S. HUGHES,
Assistant Director for Legislative Reference,
Bureau of the Budget,
Washington, D.C.
DEAR MR. HUGHES: This is in response to your request for this.
Agency's views on H.R. 5171, a bill to authorize the Administrator of
the General Services Administration to coordinate and otherwise,
provide for the economic and efficient purchase, lease, maintenance,.
operation, and utilization of electronic data processing equipment,
by Federal departments and agencies.
This measure would appear to vest complete authority in the
Administrator of the General Services Administration to .control the.
purchase, lease, maintenance, and use of electronic data processing-
equipment by Federal agencies. It is the opinion of this Agency that
the establishment of such a highly centralized control over the acqui?
sition and use of EDP equipment is both unwarranted and unwise.
We fear that the attendant administrative, coordinative, and re?
strictive procedures which would flow from this bill would prove, to be
a serious impediment to the conduct of our air safety programs-
which rely to a great extend upon the application of EDP.
This Agency now makes extensive use of special EDP equipment in.
air navigation and air traffic control, flight inspection, and related
communications systems. As an example, the computer systems.
usedin the air traffic control centers to control movement of aircraft
have attached to them specially designed equipment to work in con--
junction with the computers. This highly specialized equipment is
built to specifications which are required to satisfy the unique opera-
tional requirements for control of movement of aircraft in the air..
These computer systems are used 24 hours a day and every day of the
year in a "real time" environment. Information fed to the computers
comes from various other special system equipment in the center and
adjacent control centers, entering the computer with no intervention:
The computer immediately processes information and displays the
information on cathode ray tubes or prints the information on
specially prepared paper strips or electromechanical displays for
immediate use by the controller in making decisions relative to con-
trol of air traffic. This is but one example of how EDP equipment,
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as used in this Agency is an integral part of an operational system
which, to be properly managed, requires Agency control over all
physical resources, including EDP equipment.
While the proposed legislation provides that GSA at its discretion
may delegate certain of its authority to other agencies, this is not
satisfactory assurance that we will have the decisionmaking latitude
which we believe is necessary to carry out our statutory responsibili-
ties in the most efficient and economic manner possible. In order to
continue improving the control of air traffic and other highly special-
ized functions, we must retain full responsibility and authority over
the design, installation, and maintenance of these complex systems.
It has been necessary for us to develop a highly trained staff with
operational, programing, and technical skills who keep abreast of
these constantly changing requirements and recommend the basic
decisions necessary for the development of this system. We do not
believe it would be feasible for GSA to develop the substantially
duplicate staff required to perform or supervise the performance of
this activity.
We certainly recognize the necessity for coordination and control
of EDP programs and many agencies, including FAA, have estab-
lished centralized control of the acquisition and application of EDP
equipment within their own organizations. This is in recognition
of the large amounts of money involved, the need for maximum
utilization of the equipment, the scarcity of trained personnel, and
the need to integrate data systems for overall management purposes.
These reasons which exist within the agencies, also apply to the Gov-
ernment as a whole.
H.R. 5171 suggests, however, that no mechanism now exists for
providing central coordination of EDP activities throughout the
Government. This is not the case. As you know, the Bureau of
the Budget presently provides Government-wide coordination and
control through the normal budget processes and by prescribing
basic policies and standards for acquisition and joint use of EDP
facilities. Simply transferring this responsibility to GSA would
result in no apparent advantage to the Government. To the con-
trary, we believe it would only result in the creation .of an additional
overhead grouP and additional delays in reaching decisions and
implementing programs.
In transferring responsibility to GSA, the subject bill would also
substantially expand, and alter the nature of the coordination and
control mechanisms now existing. It would inject GSA into all
matters relating to EDP, including operation, utilization, transfer,
multiple use, and even agency organization. These are areas where
the individual agencies must have considerable discretion and au-
thority if they are effectively to carry out their statutory functions.
We do not suggest that there should be no external review or evalua-
tion of an agency's performance in this area. The General Account-
ing Office is currently carrying out this function and, we would
assume, in a satisfactory manner.
There would appear to be an advantage in the establishment and
operation of EDI' equipment pools for joint use by Government
agencies, although we do not know that additional legislative authority
would be required for this purpose. Similarly, the establishment of
an EDP capital fund would appear to have advantages if the agencies
were in a position to charge acquisition costs against the fund with
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appropriate arrangements for GSA to bill agencies for the use of
equipment in order to reimburse the fund. However, if to accomplish
this, individual agencies must justify and obtain approval from GSA
for acquisition of the equipment, any advantage would hardly be
worth the additional burden and cost. The basic decisions as to
acquisition and use should continue to be made within the framework
of budgetary justifications and standards and policies established by
the Bureau of the Budget.
There are further improvements in the EDP area which GSA
could effect under existing authority. GSA is now negotiating Gov-
ernment-wide contracts with computer manufacturers. These nego-
tiations have concentrated on the terms and conditions of use of the
equipment and significant benefits to the Government have accrued.
To date, however, GSA has not attempted to negotiate rental cost
with manufacturers. For example, agencies are still generally re-
quired to pay approximately 40 percent of the basic shift rental for
equipment use in excess of 176 hours per month. As a user, it is
difficult for us to see the justification for this charge since the equip-
ment is not subject to the same deterioration through use ?as is
mechanical or electromechanical equipment. With GSA's present
authority for contract negotiations, we feel they should take the
initiative in negotiating equipment rental costs with manufacturers.
In this connection, any significant reduction in rental for extra shift
use would tend to reduce the cost advantages of purchase.
To summarize, we believe each agency, and the Government as a
whole, should continue to explore and adapt mechanized processes
wherever possible in order to conserve personnel resources and other-
wise improve the efficiency and economy of Government operations.
The control procedures established to assure that the use of EDP
equipment proceeds wisely and economically should be simplified
wherever possible. We are convinced that H.R. 5171 would accom-
plish the opposite result.
There is involved in EDP much more than a simple procurement
and property utilization problem. The state of the art in aviation,
for example, is evolving very rapidly. The questions as to how,
when, and where to utilize EDP in the performance of our mission
are so intricate it would be virtually impossible for a central agency
to compose a staff capable of supervising and second-guessing the
decisions which must be made. Undoubtedly, this is true in many
other agencies. If the existing controls over the acquisition and use
of EDP equipment as exercised by the Bureau of the Budget and the
General Accounting Office- are found to be inadequate, a much less
drastic remedy should be explored.
Sincerely,
FOIL KERMIT GORDON,
Director, Bureau of the Budget.
DEAR MR. GORDON: Reference is made to Mr. Rommel's legislative
referral memorandum of April 10, 1963, transmitting H.R. 5171, a
bill "To authorize the Administrator of the General Services Admin-
N. E. HALABY, Administrator.
U.S. ATOMIC ENERGY COMMISSION,
Washington, D.C., May 22, 1968.
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34 AUTOMATIC DATA PROCESSING EQUIPMENT
istration to coordinate and otherwise provide for the economic and
efficient purchase, lease, maintenance, operation, and utilization of
electronic data processing equipment by Federal departments and
agencies."
By amending the Federal Property and Administrative Services Act
of 1949, as amended, this bill would authorize the Administrator of
the General Services Administration to control the purchase, lease,
maintenance, and use of electronic data processing equipment by
Federal agencies with the proviso that the Administrator, in his
discretion, may delegate this authority in three broadly defined classes
of cases. In addition, the bill would establish on the books of the
Treasury an electronic data processing fund for the various expenses
involved in the coordination, operation, and utilization of such equip-
ment by and for Federal agencies. The fund is to be credited with
advances and reimbursements from available appropriations and funds
of any agency in the amount of the cost, as determined by the Adminis-
trator, of the equipment and services rendered to the agency.
We recognize considerable merit in the bill's objectives of centraliz-
ing and simplifying the acquisition, maintenance, and use of electronic
data processina6 equipment, with economies possibly resulting to the
Government. Nevertheless, the Atomic Energy Commission con-
siders H.R. 5171 unacceptable in its present form for the reasons stated
below.
The Atomic Energy Commission now has electronic data processing
equipment representing an investment of more than $60 million
Such equipment is used by the Commission for the most part for
scienific and technical purposes, particularly in connection with devel-
opment, testing, and production of weapons and reactor research and
development. In these areas electronic data processing equipment
requirements are so inextricably linked to the intended use that only
their user is able to develop the specifications for and determine the
types and configurations of equipment needed. The use of this
equipment is so tied in with the Commission's exercise of its statutory
responsibilities that we firmly believe coordination and control of the
use of such AEC equipment by another Government agency could
seriously interfere with the functions of the Commission
We note that the bill would authorize the Administration "to
require joint utilization of such equipment by two or more Federal
agencies, and to establish equipment pools and data processing centers
for such joint use when necessary for its most efficient and effective
utilization." Inasmuch as the Commission has specific statutory
responsibility under the Atomic Energy Act of 1954, as amended,
with respect to security of certain classes of information, which could
come into conflict with actions of the Administrator directing joint
utilization or pooling arrangements, the mandatory nature of this
provision could be in conflict with the Commission's responsibility
for safeguarding information. For this reason we oppose the pro-
vision giving the Administrator authority to require joint utilization
or pooling arrangements.
Another complication raised by the proposed bill is the fact that
most of the procurement and utilization of electronic data processing
equipment is accomplished for the Commission through its many
contractors rather than by the AEC directly, and in many of these
situations the highly specialized nature of the equipment needed
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prevents orders being placed under Federal supply schedules. The
Commission could not take over these procurement and utilization
functions from its contractors without dislocating its present method
of conducting major portions of its programs through its contractors,
with resulting problems which in administrative and staffing implica-
tions alone could outweigh any economies the bill might otherwise
permit. It would, of course, not be feasible or consistent with con-
tractural relationships, and would not be contemplated by the bill as
we understand it, for another agency to attempt to exercise control
over AEC contractors.
We have no objection to an expansion of the activities of the
Administrator in entering into open-end contracts for the purchase of
electronic data processing equipment which the various Federal
agencies will he free to avail themselves of when they believe that the
contracts meet their needs and specifications.
In essence the Atomic Energy Commission believes that the con-
nection between its procurement and uses of electronic data processing
equipment and the fulfillment of its appointed tasks is so essential as
to make it incompatible with the Atomic Energy Act to place this
procurement and use under the control of another agency. Accord-
ingly, we oppose the passage of H.R. 5171 as it applies to the Com-
mission.
Sincerely yours,
DWIGHT A. INK,
Assistant General Manager.
OFFICE OF THE POSTMASTER GENERAL,
Washington, D.C., May 9, 1963.
Hon. KERMIT GORDON,
Director, Bureau of the Budget,
Washington, D.C.
DEAR MR. GORDON: This is in reply to the request of the Assistant
Director, Legislative Reference, for the views of this Department
with respect to H.R. 5171, "To authorize the Administrator of the
General Services Administration to coordinate and otherwise provide
for the economic and efficient purchase, lease, maintenance, operation,
and utilization of electronic data processing equipment by Federal
departments and agencies."
The Post Office Department does not favor the establishment of a
central control organization for the procurement or management of
electronic data processing equipment for all Federal agencies.
The use of electronic data processing equipment is vital to the day-
to-day conduct of the Post Office Department business and is con-
sidered to be an essential administrative sanction of the Department.
While the bill would permit the Administrator of General Services
Administration, in his discretion, to delegate the control of electronic
data processing equipment in certain cases, we believe that because
an exceptionally high degree of responsiveness to the data processing
needs of the Department is required, it is imperative that all phases
of administrative management of the equipment, personnel, job
schedules, and contact with vendors remain under the direct control
of the Postmaster General or his designated representative.
This Department is currently participating in the experimental
regional sharing plan for electronic computers sponsored by the Bureau
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36 AUTOMATIC DATA PROCESSING EQUIPMENT
of the Budget. The Department intends to continue in this effort
in order to help secure maximum utilization of data processing equip-
ment. However, it is not considered advisable to relinquish authority
over the management of this function since data processing services
are fundamental responsibilities of the Postmaster General.
This Department would not be opposed to the establishment of an
electronic data processing fund provided such fund is available for the
purchase of electronic data processing equipment if an economic
evaluation of the relative costs of lease against purchase indicates that
it is to the best advantages of the Government to purchase equipment
and further, that the fund is available to support extraordinary one-
time expenses for data processing services which may from time to
time occur.
Sincerely yours,
Hon. KERMIT GORDON,
Director, Bureau of the Budget,
Executive Office of the President,
Washington, D.C.
DEAR MR. GORDON: This is in response to your request for the
views of the Department of Labor on H.R. 5171, a bill to authorize the
Administrator of the General Services Administration to coordinate
and otherwise provide for the economic and efficient purchase, lease,
maintenance, operation, and utilization of electronic data processing
equipment by Federal departments and agencies.
This Department is keenly interested in the efficient utilization of
automatic data processing equipment. However, we doubt that this
will be best achieved by the enactment of H.R. 5171.
Much progress has been made in dealing with ADP problems in
recent years. The establishment of a unit in the management office
of the Bureau of the Budget has provided leadership for an overall
Federal program. Over the past 2 years, the development of a
departmentwide ADP program in the Department of Labor has begun
to show results. Not only have internal central ADP services been
set up, but the Department is performing work for other agencies and
has utilized other Federal agency systems for its own ADP needs.
Representatives of this Department have also participated in an
interagency committee sponsored by the Bureau of the Budget. As
you know, the express purpose of this committee is to develop more
agency expertise in ADP and create a greater awareness of the need
for intragovernmental cooperation, including the sharing of equipment
and the exchanging of technical assistance.
It is our position that the objectives of H.R. 5171 would be best
effected through the continued improvement of our internal ADP
program and through the continued leadership of the Bureau of the
Budget's ADP staff, with special emphasis on interagency sharing
possibilities and a careful analysis of rental-purchase arrangements.
In our opinion, the continuance of the procedures we are now
following involve less cost to the Government and to the individual
FREDERICK C. BELEN,
Acting Postmaster General.
U.S. DEPARTMENT OF LABOR,
OFFICE OF THE SECRETARY,
Washington, May 17, 1963.
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agencies than would the establishment of a new organizational unit
to perform essentially the same functions. The creation of such a
new unit would not only be expensive, but would also create many
complex administrative problems and possibly adversely affect agency
operations. It would be virtually an impossible task for GSA or any
agency to maintain objective control over the scheduling, arrange
for the joint use of systems including all of its administrative ramifi-
cations, make decisions on the transfer of equipment in and out of
agencies, allocate funds and/or make charges for ADP personnel,
supplies and equipment usage, and at the same time satisfy the basic
requirements of each agency.
For the foregoing reasons, we would 'not favor the enactment of
H.R. 5171.
Yours sincerely,
W. WILLARD WIRTZ,
Secretary of Labor.
DEPARTMENT OF AGRICULTURE,
OFFICE OF THE SECRETARY,
Washington, May 16, 1963.
Hon. KERMIT GORDON,
Director, Bureau of the Budget.
DEAR MR. GORDON: This is in reply to Mr. Rommel's request
of April 10, 1963, for a report on H.R. 5171, a bill to authorize the
Administrator of the GSA to coordinate and otherwise provide for the
economic and efficient purchase, lease, maintenance, operation, and
utilization of electronic data-processing equipment by Federal depart-
ments and agencies.
We agree with the objectives of this bill; however, we do not believe
that legislation is required to accomplish those objectives.
In Agriculture, we have established three department computer
centers. The Secretary has announced that a fourth is to be estab-
lished. These centers, which are operated by agencies of the Depart-
ment, serve all organizations within the Department. This sharing
provides accessibility to electronic data-processing equipment and
experienced personnel at reasonable costs?yet the common direction,
under the Secretary of Agriculture, of equipment, personnel and users,
provides a manageable operation.
Small-scale computers are being made available to our scientific
personnel at laboratories, engineering and research installations. This
approach places another tool in these installations. There, the use of
a computer can be a means of increasing the effectiveness of the avail-
able man-hours of personnel who are in very short supply.
The field of electronic data processing has advanced very rapidly
in the 7 years since this Department installed its first computer?it
is still developing at a tremendous rate. The rate of advancement in
the use of EDP equipment is more dependent?today--on the design
of systems, gaining acceptance, programing, and installation, than on
the equipment. However, the success of these activities is closely
dependent upon the confidence of program personnel that electronic
data-processing equipment and personnel will perform as planned.
This can be obtained most readily when the management of EDP and
the user are within the same Department.
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This bill would provide an electronic data-processing fund for ptir-
chasing computers. This objective is most desirable.
This bill would permit the establishment of centers which could be
used by organizations that do not have sufficient work to fully use a
computer. We use time on computers of other departments, such as
the Treasury Department and the Weather Bureau. The sharing of
a computer by small users is being accomplished by the Philadelphia
computer sharing project sponsored by the Bureau of the ?Budget.
Thus, this objective of the bill is now being met in three ways?
department computer centers, bilateral department arrangements to
share equipment, and the Bureau of the Budget sponsored multi-
department equipment sharing project.
This bill would provide central control over the purchase or lease of
EDP equipment. This is now provided by Bureau of the Budget
standards covering any acquisition of computers. GAO audits of
compliance and of utilization of equipment provide for the enforcement
of these standards.
Considerable data is transmitted to computers. This, in most
cases, we believe would continue even though computers were available
at many locations. The cost of dual maintenance of programs of
different computers would be an offsetting factor to any data trans-
mission cost reduction. And, any standardization of equipment,
which could eliminate dual programing, would be to the disadvantage
of the small EDP manufacturer.
For these reasons, it appears that the objectives of the bill are
being accomplished and that the bill, as proposed, would result in a
decrease rather than an increase in the rate of placing work on EDP
equipment.
Sincerely,
CHARLES S. MURPHY,
Under Secretary.
GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE,
Washington, D.C., May 21, 1963.
Hon. KERMIT GORDON,
Director, Bureau of the Budget.
DEAR MR. GORDON: Reference is made to your request for the
views of the Department of Defense on H.R. 5171, a bill "to authorize
the Administrator of the General Services Administration to coordinate
and otherwise provide for the economic and efficient purchase, lease,
maintenance, operation, and utilization of electronic data processing
equipment by Federal departments and agencies."
H.R. 5171 would add a new section 111 to title I of the Federal
Property and Administrative Services Act of 1949. The new section
would authorize and direct the Administrator of General Services to
coordinate and control the purchase, lease, maintenance, and use of
electronic data processing equipment by Federal agencies and to
operate or authorize the operation of such equipment. The Admin-
istrator would be authorized to transfer such equipment between
agencies, to require joint utilization by two or more agencies, and to
establish equipment pools and data processing centers for joint use.
In his discretion, the Administrator could delegate authority to lease,
purchase, maintain, or operate (1) general classes of equipment;
(2) equipment of special design needed to fulfill some unique require-
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ment or special purpose of a particular agency; and (3) equipment
necessary for national defense and security.
The legislation would establish on the books of the Treasury an
electronic data processing fund to be available for the above purposes.
Such fund would be credited with advances and reimbursements from
available appropriations and funds of any agency utilizing equipment
and services furnished it, and with refunds or recoveries resulting from
operations of the fund. Advances and reimbursements would be
based on rates determined by the Administrator which would approxi-
mate the costs thereof met by the fund.
The Department of Defense is strongly opposed to H.R. 5171. One
of its effects would be to place the Administrator of General Services
in the position of determining the requirements of the Department of
Defense for electronic data processing equipment. Further, it would
place him in control over the use of such equipment by the Depart-
ment, including authority to direct its ?transfer to other Federal
agencies in his discretion.
Electronic data processing equipment performs vital functions in
connection with the defense mission. It is employed in intelligence,
scientific and engineering fields, weapons fire control systems, tactical
military field operations, war gaming, damage assessment, communi
cations, and logistics operations. These systems are designed and
installed to be responsive to the operational needs of commanders
responsible for functions essential to the defense mission. For
example, in the operation of the base supply account at most Air
Force bases, electronic data processing systems are used to permit the
immediate satisfaction of priority requests for repair parts. Any
delay in such supply action may result in the grounding of weapon
systems. In this case, the management and operation of the supply
functions on a computer have become as integral a part of base oper-
ations as proc'edures on the flight line and in the maintenance hangar.
In the operation of the military supply system at the wholesale
level, electronic data processing systems are being used extensively
to furnish data necessary for making decisions at inventory control
points. Such data are used in determining requirements for repair
parts and components to support weapon systems, procuring materiel,
scheduling and managing the rebuild of weapon systems, and filling
demands for supplies on a worldwide basis. Responsibility for the
design of such data systems and the requisite computer capabilities,
together with the accumulation of source data and operation within
established performance standards and priorities, cannot be assigned
to an agency outside the Department of Defense. This management
responsibility is necessary for effective control of operating Defense
programs.
Similarly, programing, and operation of computers installed to sup-
port intelligence and war gaming activities require the collection and
storage of masses of classified information. Responsibility for the col-
lection of data and timely operation of these electronic data processing
systems is inextricably associated with the performance of the intelli-
gence and war gaming functions. With respect to such applications,
it is inconceivable that responsibility and authority for the determina-
tion of requirements and the use of electronic data processing equip-
ment should be vested in an agency outside of the Department.
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40 AUTOMATIC DATA PROCESSING EQUIPMENT
The vital role played by ADP equipment in the management and
operation of Defense programs has caused the Secretary of Defense
to establish controls over the selection, acquisition, operation, and
utilization of such equipment throughout Defense. As prescribed by
DOD instruction 5105.11, dated January 2, 1957, Subject: "Respon-
sibility for Application of ADP Systems to Business Procedures," a
senior policy official in each military department and agency has been
designated to monitor the development of systems in this area. All
requests for the acquisition of electronic computers for business data
processing systems are submitted to the Office of the Secretary of
Defense for review and approval. In the review and approval process,
both at the military department and Office of the Secretary of Defense
level, care is exercised to see that the need is valid and that it cannot
be satisfied through use of an existing Defense installation. Proce-
dures have been established to assure that all new computers are acquired
on the basis of competitive bidding, in order that the most economical
and effective alternative is followed in selecting from available ADP
capability. A program of readiness reviews and performance evalua-
tions has been used to monitor the management and utilization of these
systems. Concern with the development of effective and economical
data systems has resulted in DOD projects for standard procedures,
codes, and programing techniques.
It is estimated that by June 30, 1963, over 800 computers will be
installed supporting Defense programs?exclusive of tactical and
classified applications. These electronic data processing systems cost
approximately $350 million in rental and supporting personnel. The
size of this DOD program alone warrants close management surveil-
lance by the Secretary of Defense. The integral part which these
computers play in Defense managerial and operational systems makes
this control a mandatory responsibility of the Secretary of Defense.
It is pointed out that electronic data processing equipment is now
acquired from general schedules issued by the Administrator of General
Services. The Department of Defense provides substantial technical
support to the GSA in the execution of these contracts. The Depart-
ment supports the continued use of GSA general schedules. Since
GSA experience in this field is extremely limited (confined to 10
installations on a relatively small management application) it is as-
sumed that the technical support rendered by DOD would still be
required, and such support is assured.
With respect to the matter of lease versus purchase, this Department
is in full support of the objectives of purchasing computers on the basis
of maximum economic advantage to the Government and agrees that
where technology in this field has become stable, substantial cost
benefits may be achieved through more extensive purchasing of these
equipments. In this respect, the military departments and defense
agencies have been in the process of evaluating for the past several
months the advantages of the various methods of acquisition; i.e.,
purchase, lease, or lease with option to purchase (on an item-by-item
basis) for all installed equipment. This reappraisal is in consonance
with DOD policies and BOB Circular A--54, and is scheduled for
completion during May 1263.
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In conclusion, performance of such responsibilities for the manage-
ment of electronic data processing equipment by the Department of
Defense is a prerequisite to the control of operating programs. There-
fore, the Department opposes H.R. 5171 which would vest such re-
sponsibilities in another agency.
Sincerely,
JOHN T. MCNAUGHTON.
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
reported, are shown as follows (new matter is printed in italics,
existing law in which no change is proposed is shown in roman):
TITLE I OF THE FEDERAL PROPERTY AND ADMINISTRATIVE
SERVICES ACT OF 1949
TITLE I?ORGANIZATION
GENERAL SERVICES ADMINISTRATION
SEC. 101. (a) There is hereby established an agency in the executive
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 of the
President.
(c) There shall be in the General Services Administration a Deputy
Administrator of General Services who shall be appointed by the
Administrator 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
designate another officer of the Government, in the event of a vacancy
in the office of the Administrator.
(d) Pending the first appointment of the Administrator under the
provisions of this section, his functions shall be performed temporarily
by such officer of the Government in office upon or immediately prior
to the taking of effect of the provisions of this Act as the President
shall designate, and such officer while so serving shall receive 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 Administrator
and of the heads and assistant heads of the principal organizational
units of the General Services Administration, and taking into consid-
erationprovisions 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.
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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) the Director of the Bureau of
Federal Supply, (3) the personnel of such Bureau, and (4) the Secre-
tary of the Treasury, relating to the Bureau of Federal Supply, are
hereby transferred to the Administrator. The records, property, per-
sonnel, obligations, and commitments of the Bureau of Federal Sup-
ply, 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 transferred by
this section or vested in the Administrator by titles II, III, and V1,
of this Act, are hereby transferred to the General Services Adminis-
tration. 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. 649) 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. There 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 Bu-
reau of the Budget shall determine to relate primarily to the functions
transferred by the provisions of this subsection.
(c) Any other provision of this section notwithstanding, 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, obligations,
commitments, and unexpended balances of appropriations, allocatiuns,
and other funds, available or to be made available, of said Department,
as said Director shall determine.
TRANSFER OF AFFAIRS OF THE FEDERAL WORKS AGENCY
SEC. 103. (a) All functions iof 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
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Federal Works Agency, including those of all agencies of the Federal
Works Agency.
(b) There are hereby abolished the Federal Works Agency, the
Public Buildings Administration, the office of Federal Works Admin-
istrator, 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 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 Register of the National Archives
Establishment. 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
hereafter be known as the Administrative Committee of the Federal
Register. 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 THE AFFAIRS OF THE 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 Administrator
of General Services. The War Assets Administration, the office of
the War Assets Administrator, and the office of Associate War Assets
Administrator are hereby abolished. Personnel now holding appoint-
ments granted under the second sentence of section 5(b) of the
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44 AUTOMATIC DATA PROCESSING EQUIPMENT
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.
REDISTRIBUTION OF FUNCTIONS
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 Administrator 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.
TRANSFER OF FUNDS
SEC. 107. (a) All unexpended balances of appropriations, alloca-
tions, or other funds available or to be made available, for the use of
the Bureau 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, allo-
cations, or other 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 Administrator by the provisions of this Act, shall be
transferred to the General Services Administration for use in connec-
tion with the functions 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
records, 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.
STATUS OF TRANSFERRED EMPLOYEES
SEC. 108. Subject to other provisions of this title relating to per-
sonnel, 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.
GENERAL SUPPLY FUND
SEC. 109. (a) There is hereby authorized to be set aside in the
Treasury a special fund which shall be known as the General Supply
Fund. Such fund shall be composed of the assets of the general sup-
ply fund (including any surplus therein) created by section 3 of the
Act of February 27, 1929 (45 Stat. 1342; 41 U.S.C. 7c), and trans-
ferred to the Administrator by section 102 of this Act, such sums
as may be appropriated thereto, and the value, as determined by the
Administrator, 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
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45
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, blankbook 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 respon-
sibilities, and (2) for paying and purchase price, transportation of
personal property and services, and the cost of personal services
employed directly in the repair, rehabilitation, and conversion of
personal property.
?(b) Payment by requisitioning agencies shall be at prices fixed by
the Administrator. Until July 1, 1950, such prices shall be fixed in
accordance with law and regulations applicable on the date of enact-
ment of this Act to prices fixed by the Director of the Bureau of Fed-
eral Supply. Such prices shall be fixed at levels so as to recover so
far as practicable the applicable purchase price, the transportation
cost, inventory losses, the cost of personal services employed directly
in the repair, rehabilitation, and conversion of personal property, and
the cost of amortization and repair of equipment utilized for lease or
rent to executive agencies. Requisitioning agencies shall pay by
advance of funds in all cases where it is determined by the Administra-
tor that there is insufficient capital otherwise available in the General
Supply Fund. Advances of funds also may be made by agreement
between the requisitioning agencies and the Administrator. Where
an advance of funds is not made, the General Services Administration
shall be reimbursed promptly out of funds of the requisitioning agency
in accordance with accounting procedures approved by the Comptrol-
ler 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 services is incurred by the Ad-
ministrator, whichever is the later, reimbursement may be obtained
by the Administrator by the issuance of transfer and counterwarrants,
or other lawful transfer documents, supported by itemized invoices.
(c) The General Supply Fund shall be credited with all reimburse-
ments, advances of funds, and refunds or recoveries relating to
personal 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 procured through the fund; and
the same are hereby re appropriated for the purposes of the fund.
(e) The Comptroller General of the United States shall make an
annual audit of the General Supply 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 oper-
ations of the fund.
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(f) Subject to the requirements of subsections (a) to (e), inclusive,
of this section, the General Supply Fund also may be used for the
procurement 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 requisi-
tioning 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 con-
trol of the Administrator pursuant to this Act, the Administrator is
authorized in his discretion, with the consent of such producer or
vendor, to cause to be conducted, in such manner as the Administrator
shall specify, such tests as he shall prescribe either to determine
whether such article or commodity conforms to prescribed specifica-
tions 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 preddminantly the interest of
such producer or vendor, he shall charge such producer or vendor a
fee which shall be fixed by the Administrator in such amount as will
recover the cost of conducting such tests, including all components of
such cost, determined in accordance with accepted accounting prin-
ciples. 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 sub-
section 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 telecommunications
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, to-
gether with the value, as determined by the Administrator, of supplies
and equipment from time to time transferred to the Administrator
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 ap-
propriations and funds,of any agency (including the General Services
Administration), organization, or persons for telecommunication serv-
ices rendered and facilities made available thereto, at rates determined
by the Administrator to approximate the costs thereof met by the
fund (including depreciation of equipment, provision for accrued
leave, and where appropriate, for terminal liability charges and for
amortization of installation costs, but excluding, in the determina-
tion of rates prior to the fiscal year 1966, such direct operating ex-
penses as may be directly appropriated for, which expenses may be
charged to the fund and covered by advances or reimbursements from
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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 coordi-
nate and control the purchase, lease, maintenance, and use of automatic
data processing equipment by, or at the expense of, Federal agencies, and
to operate or provide for the operation by delegation of authority or other-
wise, of such equipment.
(b) Automatic data processing equipment suitable for efficient and
effective use by Federal agencies shall be provided by the Administrator
through purchase, lease, transfer of equipment .from other Federal agencies,
or otherwise and the Administrator is authorized and directed to provide
by contract or otherwise for the maintenance and repair of such equipment.
In carrying out his responsibilities under this section the Administrator
is authorized to transfer automatic data processing equipment between
Federal agencies, to require joint utilization of such equipment by two
or more Federal agencies, and to establish equipment pools and data
processing centers for such joint use when necessary for its most efficient
and effective utilization: Provided, That the Administrator, in his dis-
cretion, may delegate authority to lease, purchase, maintain, or operate
individual automatic data processing systems or specific units of equip-
ment, when such action is necessary for the economy and efficiency of
operations, or when such action is essential to defense or security: Pro-
vided further, That the Administrator, in his discretion, prior to the
beginning of fiscal year 1966, may delegate authority to lease, purchase,
maintain, or operate automatic data processing equipment to the various
Federal agencies to the extent necessary and desirable to allow for the
orderly implementation of this utilization program.
(c) There is hereby authorized to be established on the books of the
Treasury an automatic 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 contractor
otherwise, necessary for the efficient coordination, operation, utilization
of such equipment by and for Federal agencies: Provided, That a report
of receipts, disbursements, and transfers to miscellaneous receipts under
this authorization shall be made annually in connection with the budget
estimates to the Director of the Bureau of the Budget and to the Congress.
(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 transferred
to the Administrator, 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 Services Administration), organization, or contractor utilizing
such equipment and services rendered them, at rates determined .by the
Administrator to approximate the costs thereof met by the fund (includ-
ing depreciation of equipment, provision for accrued leave, and for amor-
tization of installation costs, but excluding, in the determination of rates
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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, in-
cluding the net proceeds of disposal of excess or surplus personal prop-
erty and receipts from carriers and others for loss of or damage to prop-
erty: 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 accompanying section 201(a) (63 &at. 388), the pro-
visions of section 602(d) (68 Stat. 401), and any other provisions of the
Federal Property and Administrative Services Act of 1949, as amended
(68 Stat. 377), or of any other provisions of law which are inconsistent
with the purposes and provisions of section 111 shall not be applicable.
0
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