uipment B-764018 National Aeronautics and Space Admmstratlon , BY THE COMPTROLLER GENERAL OF THE UNITED STATES . COMPTROLLER GENERAL OF THE UNiTED STATES WASHINGTON DC 20548 B- 164018 To the President of the Senate and the Speaker of the House of Representatives This 1s our report on opportunltles for savings by in- creasing competition In procurement of commercial equipment by the Natlonal Aeronautics and Space Admlmstratlon. Our review was made pursuant to the Budget and Account- ing Act, 1921 (31 U.&C. 53), and the Accounting and Auditing Act of 1950 (31 U.S.C. 67). Copies of this report are being sent to the Dlrector, Of- fice of Management and Budget, and to the Actmg Admmlstra- tor, Natlonal Aeronautics and Space Admxustratlon. Comptroller General of the United States BESTDOCUMENTAVAlLABLE - SOTH ANNIVERSARY 1921- 1971 - COMPTROLLERGENERAL'S OPPORTUNITIES FOR SAVINGS BY INCREASING REPORT TO THE CONGAESS COMPETITION IN PROCUREMENT OF COMMERCIAL EQUIPMENT National Aeronautics and Space Admlnlstratlon B-164018 DIGEST ------ WHY THE REVIEW WASMADE The General Accounting Office (GAO) has reviewed the procurement of equipment by the NatIonal Aeronautics and Space Administration (NASA) to determine whether its pollcles, procedures, and practices have resulted in maximum competltlon as directed by law The equipment covered In this revlew consjsted of catalog, or off-the-shelf, Items and did not include special equipment designed to meet the specific needs of the users The equipment generally consisted of such items as electronic instrumentation devices and photographic and laboratory equipment The revlew was made at five centers which purchased about $41 4 million worth of equipment during 1968 FINDIIVGS AND CONCLUSIONS A significant number of purchases had been made without effective competltlon because, 1t-1 many instances , restrictive specifications governed the procurement Generally, specifications were prepared by the equipment users or under their direction and included spe- cial features which the users desired These special features usu- ally were available only on a particular piece of equipment from a single supplier In some cases the special features were unneces- sary If equipment users had not specified such features, specifi- cations could have been less restrictive, which probably would have resulted in Increased cornpetitIon and in savings to the Government (See P 5 ) Analysis of 1,239 contracts awarded during 1968 for equipment cost- ing about $24 4 millIon showed that 795 of the contracts (64 percent) I had been awarded without effective competltlon Of the 795 contracts, I 389 had been negotiated on a sole-source basis For the other 406 contracts, bids had been solicited from more than one supplier but in every case only one bidder's equipment met the speclflcatlons (See p. 5 ) GAO mailed questionnaires to a number of NASA suppliers and inter- viewed their representatives Several suppliers informed GAO that, when they received an invitation for bid that specified a brand name or equal, they did not respond because experience had shown that the brand-name supplier would receive the award (See p. 7 ) Tear Sheet 1 I I I I 1 I I GAO believes that there is little lncentlve on the part of suppliers I of the preferred brands to offer their products at competitive prices I when they recognize their products' charactenstlcs in the specIfica- I I tions I I Examples of procurements of equipment in which competition was llmlted I I as a result of restrictive specifications are discussed on pages 9 I through 14 I I GAO believes that, although NASA's procurement policy (see p 4) 1s 1 I basically sound, restrictive specifications have limited competltlon I The basic cause for excessive use of restrictive speclflcatlons was a I lack of effective management control Review and approval of equ-rp- I ment purchase requests and of speclflcatlons were insufficient to en- I sure that the equipment requested was necessary, that 1-L satlsfled I I only mlnlmum needs, and that the speclflcatlons were not unnecessarily I restrictive (Seep 17) I I I The inadequate review and approval process places equipment users In I a posltlon to decide which suppliers' equipment they wants to prepare I speclflcatlons based on the unique characteristics of the Items wanted, I I and to be virtually assured of getting them It usually is not eco- I nomical for a suppller to modify existing equipment to compete with an- i other supplier that can meet the speclflcations wlthout changes in 1'~s I product (See p 17 ) I I I Equipment speclflcatlons based on a particular suppller's equipment or specifying a brand name or equal should be used only when no alterna- i I tives are possible I I Justlflcatlon for such equipment should (1) Identify the research proJ- I ect or work for which the equipment 1s needed and should explain the I I need for the equipment, (2) identify all special requirements dlctat- lng a sole-source procurement or the use of restrictive speclficatlons, i (3) describe the benefits of the special requirements, and (4) list I I the estimated cost of the minimum acceptable alternative equipment I that could be used if the special requirements were not necessary I I I Such Justification would provide reviewing officials with adequate in- I I formation to ensure that the equipment requested satisfies the mln7mum I needs of the Government and that the specifications are not unneces- I sanly restrictive I I I I I RECOiYiWNDATIONSOR SUGGESTIONS I I To Increase competltlon and to provide for the procurement of equlp- I ment that meets actual minimum needs, the Admlnlstrator of NASA should 1 I --require the use of specifications that have acceptable ranges of I dlmenslons, performance, and other characterlstlcs of the mInimum I I equipment necessary to fulfill the Government's requirements and I I I I I 2 I I I --require that requests fo; &e&purchase of equipment clearly state whether the speclflcatlons are brand name or equal or have been prepared on the basis of equipment descnptlons in a suppller's catalog and, of so, that the requests give full wrItten Justlfi- catlon of the need for any restrlctlve features speclfled (See P. 18 ) AGENCY ACTIONS AND UNRESOLVEDISSUES NASA stated that it was in full agreement with the ObJective of the recommendations and that it intended to implement requirements empha- slzlng to contracting and management officials the need to increase competition (See p 18 ) MATTERS FOR CONSIDERATION BY THE CONGRESS This report IS sent to the Congress to Inform It of the actions to be taken by NASA to Increase competition in procurement Tear Sheet 3 Contents Page DIGEST 1 CHAPTER 1 INTRODUCTION 4 2 COMPETITION LIMITED BY UNNECESSARILY RESTRIC- TIVE SPECIFICATIONS 5 Noncompetitive procurements 5 Restrictive specifications 6 Examples of use of restrictive specifica- tions 9 Weaknesses rn evaluating equipment re- quests 15 3 CONCLUSIONS, RECOMMENDATIONS, AND AGENCY COMMENTS 17 Conclusions 17 Recommendations 18 Agency comments 18 4 SCOPE OF REVIEW 20 APPENDIX I Letter dated July 30, 1970, from the Acting Associate Administrator for Organization and Management, National Aeronautics and Space Administration, to the General Ac- counting Office 23 II Principal offlcnals of the National Aeronau- tics and Space Administration responsible for the activities discussed in this re- port 26 COMPTROLLERGENERAL'S OPPORTUNITIES FOR SAVINGS BY INCREASING REPORTTO THE CONGRESS COMPETITION IN PROCUREMENT OF COMMERCIAL EQUIPMENT National Aeronautics and Space AdmInIstratIon B-164018 DIGEST we---- WHYTHE REVIEW WASMADE The General Accounting Office (GAO) has reviewed the procurement of equipment by the National Aeronautics and Space AdminIstratIon (NASA) to determine whether its pol~cles, procedures, and practices have resulted in maximum competltlon as directed by law The equipment covered In this review consisted of catalog, or off-the-shelf, items and did not include special equipment designed to meet the specific needs of the users The equipment generally consisted of such Items as electronic Instrumentation devices and photographlc and laboratory equipment The review was made at five centers which purchased about $41 4 million worth of equipment during 1968. FINDINGS AND CONCLUSIOIVS A slgn~f=~cant number of purchases had been made without effective competlt~on because, in many Instances, restnctlve speclflcatlons governed the procurement Generally, specifications were prepared by the equipment users or under their dlrectlon and included spe- cial features which the users desired These special features usu- ally were available only on a particular piece of equipment from a single supplier In some cases the special features were unneces- sary. If equipment users had not specified such features, speclfl- cations could have been less restrictive, which probably would have resulted In Increased competition and In savings to the Government. (See P* 5.) Analysis of 1,239 contracts awarded during 1968 for equipment cost- lng about $24 4 millIon showed that 795 of the contracts (64 percent) had been awarded without effective competltlon Of the 795 contracts, 389 had been negotiated on a sole-source basis For the other 406 contracts, bids had been sbl~clted from more than one supplier but In every case only one bidder's equipment met the speclflcatlons (See p. 5.) GAO mailed questionnaires to a number of NASA suppliers and inter- viewed their representatives Several suppliers Informed GAO that, when they received an lnvltation for bid that specified a brand name or equal, they did not respond because experience had shown that the brand-name supplier would receive the award. (See p. 7 ) GAO believes that there IS little ~ncentlve on the part of suppliers of the preferred brands to offer the-rr products at competltlve prices when they recognize their products' characterlstlcs in the specifica- t-rons Examples of procurements of equipment ?n which competltlon was 17mted as a result of restrictive specifications are discussed on pages 9 through 14 GAO belleves that, although NASA's procurement policy (see p, 4) IS basically sound, restnctlve specifications have llm~ted competition The basic cause for excessive use of restrictive specifications was a lack of effective management control Review and approval of equip- ment purchase requests and of specifications were lnsufficlent to en- sure that the equipment requested was necessary, that it satisfied only minimum needs, and that the specifications were not unnecessarily restrictive (See p 17 ) The inadequate review and approval process places equipment users In a position to decide which suppliers' equipment they want, to prepare specifications based on the unique characteristics of the items wanted9 and to be virtually assured of getting them. It usually IS not eco- nomical for a supplier to modify ex-rstlng equipment to compete with an- other supplier that can meet the speclflcatlons without changes in its product (See p 17 ) Equipment speclflcatlons based on a part?cular supplier's equipment or specifying a brand name or equal should be used only when no alterna- tives are possible Justlflcation for such equipment should (1) ldentlfy the research proJ- ect or work for which the equipment IS needed and should explain the need for the equipment, (2) ldentlfy all special requirements dicta-t- lng a sole-source procurement or the use of restnctlve specifications, (3) describe the benefits of the special requlrementsg and (4) list the estimated cost of the minimum acceptable alternative equipment that could be used if the special requirements were not necessary Such Justification would provide reviewing officials with adequate in- formation to ensure that the equ-rpment requested satlsfles the minimum needs of the Government and that the specifications are not unneces- sarily restrictive RECOMM.ENDAT~ONS OR SUGGESTIONS To increase competltlon and to provide for the procurement of equlp- ment that meets actual mlnJmum needs, the Admlnlstrator of NASA should --require the use of speclficatlons that have acceptable ranges of dimensions, performance, and other characteristics of the minimum equipment necessary to fulfill the Government's requirements and 2 --require that requests for the purchase of equipment clearly state whether the speclflcatlons are brand name or equal or have been prepared on the basis of equipment descnptlons In a supplier's catalog and, of so, that the requests give full written ~ustifi- cation of the need for any restrlctlve features speclfled (See P 18.1 AGENCYACTIONS AND UNRESOLVEDISSUES NASA stated that It was in full agreement with the obJective of the recommendations and that it Intended to Implement requirements empha- slzTng to contracting and management offlclals the need to Increase competition (See p 18.) MATTERSFOR CONSIDERATIONBY THE CONGRESS This report IS sent to the Congress to inform it of the actions to be taken by NASA to Increase cornpetitIon in procurement CHAPTER 1 INTRODUCTION The National Aeronautics and Space Act of 1958 (42 U.S.C. 2451) authorized the peaceful exploratron of space and established NASA to research into and solve problems of flrght In and out of the earth's atmosphere and to develop, construct, test, and operate aircraft, mlsslles, satellites, other space vehicles, and related equipment for research purposes. Chapter 137, Title 10, United States Code, formerly the Armed Services Procurement Act, provides that the procurement of goods and services by the Government be made, to the ex- tent possible, under condltlons of full and free competition, The NASA Procurement Regulation states that "Plans,drawings, speclflcations or purchase de- scriptions for procurements shall state only the actual minimum needs of the Government and de- scribe the supplies and services in a manner which will encourage maximum competition and eliminate insofar as is possible, any restrictive features which might limit acceptable offers to one sup- plier's product, or the products of a relatively few suppliers." The operations of NASA are under the direction of four offices the Office of Manned Space Flight, the Office of Space Science and Appllcatlons, the Offrce of Tracking and Data Acquisltlon, and the Office of Advanced Research and Technology. The equipment covered In this review consisted of cat- alog, or off-the-shelf, items and did not include special equipment designed to meet the specific needs of the users. The equipment generally consisted of such items as elec- tronic instrumentation devices and photographic and lab- oratory equipment. The scope of our review 1s described m chapter 4. The principal officials of NASA responsible for the ac- tivitles discussed in thrs report are listed ln appendix II. 4 CHAPTER 2 COMPETITION LIMITED BY UNNECESSARILY RESTRICTIVE SPECIFICATIONS Our review at five centers revealed that, in many in- stances, the use of restrictive specifications for the pro- curement of equipment had resulted in a significant number of purchases ' being made without effective competition. Generally, specifications were prepared by equipment users or under their direction and included those special features which the users considered necessary or desirable. We found, however, that the special features were generally available only on a particular piece of equipment from a single supplier and that, in some cases, the special fea- tures were unnecessary. If equipment users had not specified such special fea- tures, the invitations for bids for the equipment could have contained less restrictive specifications, which probably would have resulted in increased competition and in savings to the Government. NONCOMPETITIVE PROCURE~NTS To determine the extent of competition for equipment purchases at the five centers, we compiled statistics on equipment purchases during calendar year 1968. The statis- tics showed that four of the centers had awarded 1,029 con- tracts In the total amount of about $18.2 million and that the frfth center, Goddard Space Flight Center, had awarded 828 contracts in the amount of about $23.2 million. We selected for analysis 210 of the Goddard contracts--in the amount of about $6.2 million--on a random basis and all the 1,029 contracts awarded by the other centers. Thus our analysis included 1,239 contracts covering equipment pur- chases in the amount of about $24.4 million Our analysis revealed that 795 contracts, or about 64 percent, had been awarded without effective competltlon. Of the 795 contracts, 389 had been negotiated on a 5 sole-source basis, For the other 406 contracts, bids had been solicited from more than one supplier but in each case only one bidderIs equipment met the specifications. The details for each center are shown in the following table, Noncompetitive Awarded on Total Sole basxs of Compet- awards Center source one bid Total itive revrewed Ames 121 28 149 54 203 Electronics 85 117 202 91 293 Goddard 74 72 146 64 210 Langley 57 129 186 140 326 Lewis 52 60 112 207 Total 389 * 1.239 Percent 31 33 64 36 100 RESTRICTIVE SPECIFICATIONS We found that the lack of effective competition was primarily attributable to the widespread practace of tarlor- ing procurement speclfacataons to a particular suppllerfs product and that this practice limited the number of sup- pliers that were able to respond to the invitations for bids. The tailoring of specifications generally was accom- plished in one of two ways, One practice was to cite a particular brand and model and to stipulate that an equal would be acceptable if the equal could meet certain charac- terlstics. The other technique was to copy verbatim or to paraphrase the description of the preferred brand and model in the supplier's catalog. We found that, when either of these two ways of writing specifications was used, the procurement usually was made under one of the following circumstances. 1. The preferred brand was bought on a sole-source basis without solicitation of other bids, 2. The preferred brand was bought because no other brds were receaved. 3, The preferred brand was bought because lower bids for other brands were rejected for not meeting specifications, We were told by technical personnel at the centers, and our review conflrmed, that it was common practice for the users of equipment to select in advance the brand and model desired and then to write the specrflcations around the features of that brand, We found that these features often had lrttle or no relation to actual performance re- qulrements but were apparently Included only to ensure pro- curement of the preferred brand, Consequently, if a sup- plrer offered another brand that could meet the center's actual requirements, the supplIer's bid could be ruled non- responsive for failure to comply wl-th the specaflcations. Although the users probably were sincerely motivated to select what they consrdered to be the product best sulted for their purposes, we belleve that they often attempted to obtain the highest performance and most desirable features available without adequate consrderatlon of whether the added cost of such features was Justified by the benefits that would be realized, Moreover, since users cannot al- ways be completely familiar with all products on the mar- ket, the practnce of basing specifications upon the physl- cal features of a preferred brand may result, m some cases, 1.n excludmg from consideration another brand which has higher performance characteristics than those of the preferred brand. To obtain the views of NASA suppllers on the centers' practice of using restrictive speclficatlons, we mailed questlonnalres to a number of suppliers and interviewed therr representatives. Several suppliers rnformed us that, when they received an rnvltation for bid that specrfred a brand name or equal or when they recognized that the speci- fications were based upon the features of a particular brand, they did not respond because experience had shown that the brand-name supplier would receive the award. Generally, the suppllers that we contacted expressed the ophnron that NASA could increase competition for its equrpment purchases if rt would base the specxflcatlons on the performance characterxstlcs needed to fulfill NASA re- quirements rather than on the physical characteristics of one suppllerOs product. In view of the suppliers' comments, we belreve that lnvitatlons for bids that cite specifications based on par- tlcular brands restrict competition because suppliers of other brands believe that NASA prefers the products rndi- cated by the speclficatlons and therefore do not bid, As a result, we belleve that there 1s little incentive on the part of supplrers of the preferred brands to offer their products at competrtlve prices when they recognize therr products" characterrstlcs In the speclf ications. EXAMPLES OF USE OF RESTRICTIVE SPECIFICATIONS To gain greater rnsaght Into the equipment procurement systems at the centers, we selected 40 noncompetrtlve pro- curements and examnned into each one In detafl. Our review of these procurements revealed the following lnformatlon Number of cases Competltlon llmlted because of: Use of restrrctLve tailored specrfications 29 Use of restrictive brand-name or equal specifications No restractlon of competition noted - ii Total Following are examples of procurements of equipment In which competltlon was llmlted as a result of the use of re- strictive specifications. Video tape recorder A center had a need for a video tape recorder to be used in recording test subjects' physical and facial reac- tions under various controlled condrtlons Because some of the tests were to be conducted In a mobile medical monltor- ing trailer where space was at a premium, the researcher specified that the recorder be sufflclently compact to be mounted in a 19-inch equipment rack. He specified also that the recorder have the maximum continuous recordrng time capa- bility available, to mlnlmize the need for Interrupting test projects to change the tape. The technician who was asked to develop the speclflca- tlons told us that he had reviewed vendors' catalogs and had determlned that the longest continuous recording time avall- able on the market was 90 minutes and that the recorder with this capabllaty apparently would fit anto a 19-inch equlp- ment rack. He then wrote the speclficatlons around the fea- tures listed In the catalog for this model recorder and In- cluded the requirement that it be capable of flttlng into the 9 equipment rack. Subsequently, the supplier of this recorder notified the center that it could not be mounted in a 19- Inch rack. The technicIan then rewrote the specifications to eliminate the requirement for rack mounting, stating that, when the recorder was used in the trailer, it would be placed on a table rather than rn the equipment rack. Neves- theless, the size and weight limitations, which were based on the dimensions and weight of the preferred model, re- mained unchanged in the specifications. Invitations for bid for the procurement of the recorder were sent to 23 suppliers, but only two bids were received, in the amounts of $4,350 and $5,550. The supplier submlt- tlng the low bid stated that it was offering: rr*** [a] video tape recorder which provides the basic functional and operational characterls- tics as interpreted by Specifications No. L50- 9012A. "The specifications as written are restrictive to one particular manufacturer and source of supply therefore llmlting the competitive pro- curement position the Federal Government de- sires .I' The low bid was reJected because the recorder had the capability for only 60 minutes of uninterrupted playing time instead of the required 90 minutes, because it exceeded slightly the size and weight limitations, and because of certain other minor differences. The contract was awarded to the higher bidder, the supplier of the recorder that had been the basis for the center's specifications. The recorder was received by the center in August 1968 but was inoperable and had to be returned to the manufac- turer for repair. It was not returned to the center until December 1968. At the time of our review in September 1969, none of the tests had exceeded about 45 minutes and many of the tests had included interruptions which would have pro- vided the opportunity to change tapes nf it had been neces- sary to do so. 10 We discussed this procurement with the researcher using the recorder, who stated that he was not aware of the $1,200 difference between the prrce of the recorder that was pur- chased and the low bid, He told us that, had he been aware of this drfference, he would have reconsidered hrs request for the go-minute recorder. Tow tractor A center's lnvltatclon for bids for the procurement of a tow tractor contained speclflcatlons based on those in the catalog description of a brand and model which center offi- cials had determined would meet the center's needs. The speclflcatlons cited the brand name and model or equal and listed a number of required features which were ldentlcal with those of the preferred brand, lncludlng a 4,000-pound drawbar pull, a six-cylinder gasoline-powered engine with approximately 227-cubic-inch displacement and 84 brake horse- power, a fully synchronized transmission wzth three forward speeds and one reverse speed, and hydraulic brakes with an Orscheln-type parking brake. The contract file did not contain documentation justl- fying the need for these specific features or evidence that these speclflcatrons had been questioned during the purchase request approval process. Moreover, none of the center of- flclals whom we rntervlewed, including some of the approvrng officials, could explain the function of, or the need for, the specified Orscheln-type parking brake. SIX frrms were rnvlted to bid on the tow tractor, but only one bid was received. The other five firms replied that they were unable to meet the specrflcations. A con- tract for the tow tractor was awarded to the vendor whose catalog had been used as the basis for preparing the pur- chase speciflcataons. The contract price was $5,380. We contacted a number of suppliers and determined that there were several other brands of tow tractors available at comparable or lower prices, whrch had a 4,000-pound or more drawbar pull but which could not meet one or more of the other specifications. For example, two of these tractors had engrnes with fewer than six cylinders. Center officials told us that a SIX-cylinder engine was not absolutely necessary and that a tractor with fewer cylinders might have been acceptable rf It could do the job required. They said that, In addltlon to the 4,000-pound drawbar pull, the essential requirements were weight and safety. Since the lower priced tractors that we Identafied had not been evaluated by the center's technical personnel, we could not determlne whether they would have met the weight and safety requirements. We belleve that it IS apparent, however,thatthe restrictive specaflcations effectively eliminated from competltlon for this advertised procurement all but the preselected brand and model of tow tractor. Audio tape recorders A center needed seven audio tape recorders for use In sonic-boom tests to be conducted in Californlals MoJave Desert, Because of the remoteness of the test locations, the center desired a recorder with a low power consumption, to permit operation from a storage battery. The speclflcatlons were based on the catalog descrip- tion of a model with a power consumption of 125 watts, which we understood was the lowest power consumption of any recorder then available. The speclflcatlons cl-ted maxlmum dlmenslons that approximated those of the preferred brand and cited many other features that were copied almost ver- batim from the supplier's catalog, including the capablllty to operate at an altitude of 70,000 feet. Since the sonic booms were to be recorded at ground level, the only reason for including this requirement appeared to be that It was a feature of the preferred recorder. The center sollclted bids for the procurement of the recorders from 53 suppliers but recenved only three bids, in the amounts of $112,798, $106,750, and $75,740. The low bid was reJected because, among other things, the recorder!s power consumption was 500 watts, which exceeded the specs- fled maximum of 125 watts. The second lowest bid was re- celved from the supplier around whose catalog descrlptlon the speclflcatlons had been written. This bid was accepted and the recorders were purchased for $106,750. The suppller was late In dellverlng the recorders, and, after they were delivered, the center found them to be 12 defective. At the time of our fleldwork, the center had re- turned the recorders to the manufacturer numerous times and was still trying to have them repaired under the warranty When less than a month remained before commencement of the scheduled tests and the center had not yet received the tape recorders in an operable condition, it sollclted new proposals for the procurement of seven tape recorders to ac- complish the tests. Because of the urgency of the require- ment, the proposals were solicited by telephone, requiring delivery withln 10 days, although the center recognized that this requirement might exclude from biddIng a number of ma- Jar tape recorder manufacturers who conceivably could meet the speciflcatlons. The specifications for this procurement were based upon two selected commercial models or equal. Two proposals were received One, in the amount of $68,565, was for the recorder for which a bid of $75,740 had been received under the original solicitation The other proposal, in the amount of $64,750, was for a brand of re- corder for which a bid had not been received in the original solicitation. The center accepted the low proposal and ne- gotiated a contract for the purchase of the seven recorders for $64,750, Since these recorders had a power consumption of 500 watts and could not be operated from storage bat- teries, the center also purchased seven electric generators at a total cost of about $1,750. We were informed by the researcher that these tape recorders satlsfactorlly met the center's requirements for the sonic-boom tests. It is apparent that the center did not consider all the alternatlves when it purchased the original recorders at a cost of $106,750. Had It done so, it could have purchased seven recorders and seven generators to accomplish the tests at a considerably lower cost. Leak detector A center had a need for a leak detector to detect and measure leaks In vacuum systems. The user of this equipment identified the need for the equipment, selected the pre- ferred brand and model, drafted the purchase request, pre- pared the specifications, recommended the source, evaluated 13 the bids, selected the supplier to receive the award, and accepted the equrpment upon delivery. The bid solicitation cited a brand name or equal in ac- cordance with specifications which included such special features as sensitivity, response time, cleanup time, cold trap, remote control, dimensions, and operating instructions permanently printed on the instrument, all of which were taken from a catalog description of the preferred model Invitations for bid were sent to 12 suppliers and five bids were received, ranging from a low of $2,986 to a high of $4,540. The second haghest bid, In the amount of $4,090, was for the leak detector on which the center's specifica- tions had been based. The three lowest bids were declared nonresponsive for failure to meet the specifications, and the award was made to the supplier of the preferred brand. The highest bid was not evaluated for compliance with the specifications. The lowest bid was rejected because, among other rea- sons, the instrument did not have a cold trap. The user of the equipment informed us that the purpose of the cold trap was to condense out harmful vapors and to protect the sys- tem from contamination. Our examination of the catalog describing the detector for which the low bid was submitted showed that it had a titanium pump which removed impurities from the system by a different process than the cold trap. The user told us that he had not been familiar with the titanium pump and that, had he been aware of its capability, he would have given more consideration to the low bid in view of the price difference of more than $1,000. Although we do not know for certain that the lowest priced leak detector would have fulfIlled the center's re- quirements since the low bid was reJected without a techni- cal evaluation of the titanium pump, we believe that this procurement illustrates the effect of basing specifications on the features of a preselected brand and model instead of on actual performance requirements 14 WEAKNESSES IN EVALUATING EQUIPMENT REQUESTS We belleve that the use of restrlctlve speclflcatlons stems from a lack of effective management control over the review and approval of equipment purchase requests and of the accompanying speclflcatlons. The users of equipment are responsible for preparing the purchase requests and the equipment speclflcatlons. NASA procedures require that these requests be revlewed and approved by users' branch and dl- vlslon chiefs. Our review showed that purchase requests generally did not contain wrltten Justlflcatlons of equipment needs or other lnformatlon necessary for the reviewing offxlals to determine that the required equipment was necessary, that It satlsfled only mlnlmum needs, or that the accompanying speciflcatlons were not unnecessarily restrictive. We dls- cussed with branch and dlvlslon chiefs at the various cen- ters the basis for approving requests., At one center they told us that they relied heavily on the Judgment of the users to make the proper determlnatlons of what to buy. Some offlclals told us that In revlewlng purchase requests they were concerned prlmarrly with the avallablllty of funds. After a purchase request has been approved by thebranch and dxvlslon chief and, In some Instances, by an asslstant drrector, It 1s reviewed in the center's procurement office. According to procurement personnel, they seldom question the need for special features of equipment because they are not qualified to make a determlnatlon of the need for technlcal features. We believe that the procurement personnel should be able to rely upon the branch and dlvlslon chiefs to ade- quately fulfill their reviewing responslbllltles. It fol- lows, however, that such reliance requires that equipment needs be thoroughly evaluated at those management levels. NASA's cost reduction reports show that slgnlflcant savings can be obtained when equipment requests are closely evaluated, as illustrated by the following cases. 1. After determining that a certain contractor was the only source avaIlable for the procurement of shlp- board counters, a center requested the contractor to submit a proposal for the counters. The contractor submltted a proposal of $120,000, which the center consldered excessive. After obtalnrng competltlve bids from other contractors, the center awarded a contract to the low bidder for $30,000. 2. A center needed four cameras to Include In Its pho- tographlc system for a launch simulator. In 1967 a request for a proposal was sent to the sole-source contractor, who offered the Items for $30,000. Be- cause of budget constraints, however, the center could not purchase the cameras. After reexamlnlng Its requirements, the center determlned that ex- isting cameras could be modlfled to satisfy Its needs. The modlflcatlons were made for $2,200. 3. A user requested that a certain item be bought from a speclflc contractor because that contractor was the only one that could furnish the Item. Contract- ing personnel questloned this declslon and sollclted bids from other sources. Eight bids were received, ranging from a low bid of $62,975 to the high of $203,500 that was submltted by the recommended sole source. The award was made to the low bidder. As part of our review, we examined reports Issued by NASA's internal auditors and found that from March 1965 three reports had been issued that included findings slmllar to ours. They reported that the Lewis Research Center not only had a very high number of sole-source procurements but also hadlnsufflclentdocumentatlon to Justify buying items on this basis. In August 1967 the auditors reported that, at the George C. Marshall Space Flight Center, the Justlfl- cations often lacked enough lnformatlon to establish the necessity for purchasing items on a noncompetltlve basis and that procurement speclflcatlons had been prepared on a basis that precluded competltlon. In September 1968 they reported that the Electronics Research Center needed to obtain in- creased competltlon for Its purchases. 16 C-MPTER 3 CONCLUSIONS, RECOMMENDATIONS. AND AGENCY COMMENTS CONCLUSIONS We belleve that, although NASA's procurement policy is basically sound, its practice of using restrictive specifi- cations has resulted in llmlted competltlon. Our review indicated that the basic cause for excessive use of restrlc- tlve speclflcatlons was a lack of effective management con- trol over the review and approval of equipment purchase re- quests and of specifications to ensure that the equipment requested was necessary, that it satisfied only minimum needs, and that the specifications were not unnecessarily restrictive. This Inadequate review and approval process places equipment users In a position to decide which suppliers' equipment they want, to prepare speclficatlons based on the unique characterlstlcs of the items wanted, and to be vir- tually assured of getting them, We believe that invlta- tlons for bids that contain speclflcatlons based on de- scrlptlve features of a particular product, rather than on performance requirements, result in limited competltlon be- cause It usually is not economical for a supplier to modify existing equipment to compete with another supplier that can meet the speclflcatlons without changes in its product. In our opinion, the centers' procurement systems need to be strengthened to realize the economies normally achieved through competition and to obtain adequate assur- ance that equipment purchases are consistent with mlnlmum needs. In addition, we believe that NASA should reempha- size to its centers Its basic procurement policy and should establish the controls necessary to ensure that the policy 1s properly implemented. We believe that equipment specifications which are based on a particular supplier's equipment or which specify a brand name or equal should be used only when no alterna- tives are possible. We believe also that Justification for such equipment should (1) identify the research proJect or 17 work for which the equrpment 1s needed and should explain the need for the equipment, (2) identify all special requlre- ments which necessitate a sole-source procurement or the use of restrictive specifications, (3) describe the benefits of the special requirements, and (4) list the estimated cost of the minimum acceptable alternative equipment which could be used if the special requirements in item (2) above were not necessary. Such Justifications would provide reviewing of- facials with adequate information to ensure that the equip- ment requested satisfies only the minimum needs of the Gov- ernment and that the specifications are not unnecessarily restrictive. RECOMMENDATIONS To Increase competition and to provide for the procure- ment of equipment that meets actual minimum needs, we rec- ommend that the Administrator of NASA: --Require the use of specifications that have accept- able ranges of dimensions, performance, and other characteristics of the minimum equipment necessary to fulfill the Government's requirements. --Require that requests for the purchase of equipment clearly state whether the specifications are brand name or equal or have been prepared on the basis of equipment descriptions in a supplier's catalog and, lf so, that the requests give a detailed written JUS- tlfication of the need for any restrictive features specified. AGENCY COMMENTS NASA's comments on our draft report were furnished to us in a letter dated July 30, 1970 (see app. I), by the Act- ing Associate Administrator for Organization and Management. NASA advised us that it was in full agreement with the obJective of the recommendations and intended to implement operating requirements which would emphasize to contracting and management officials the need to increase competition in the procurement of commercial-type equipment. 18 NASA stated that It Intended to require a certlflca- tlon, with concurrence at no lower than the dlvlslon level of the requesting organlzatlon, that the speclflcatlon em- ployed the widest ranges of characterlstlcs consonant with the use envlsloned for the equipment and that, In the req- ulsrtloner's Judgment, no quality or characteristic was stated as a requirement which was not necessary for the ad- equate performance of the equipment. NASA stated also that, If such a certlflcatlon cannot be made, the documentation accompanying the request should provide full particulars and a Justlflcatlon for the use of the restrlctlve speclfl- cation. NASA stated further that the certlflcatlon would be expanded to provide notlflcatlon when a manufacturer's cat- alog had been used In preparing the speclflcatlons or when speclflcatrons were brand name or equal. NASA stated that, in such cases, the requlsltloner would be required to make a written determination that In his judgment the use of brand-name or equal purchase descrlptlons or speclflcatrons would permit adequate competltlon and that all the known acceptable brand-name products meeting the user's requlre- ments had been listed In the determlnatlon. In addition, NASA stated that It was confident that the certsflcatlons and Justlflcatlons described above would serve as an effective means to realize the desired lmprove- ment In procurements of the type questioned by GAO and that center directors would be requested to implement approprl- ate procedures rmmedlately. 19 CHAPTER 4 SCOPE OF REVIEW Our review Included an examlnatlon of pertinent records and documents at the Ames Research Center, Moffett Field, Callfornla, the Electronics Research Center, Cambridge, Massachusetts, the Goddard Space Flight Center, Greenbelt, Maryland, the Langley Research Center, Hampton, Vlrglnla, and the Lewis Research Center, Cleveland, Ohlo. We complied statlstlcs showing the amount of competl- tlon that these centers obtalned In the award of 1,239 con- tracts for equipment during calendar year 1968. We also selected for detalled examlnatlon 40 noncompetltlve procure- ments at the five centers. 20 APPENDIXES 21 APPENDIX I Page 1 NATIONAL AERONAUTICS ANB SPACE ABMINISTRATION WASHINGTON DC 20546 JUL 30 1970 REPLY TO ATTN OF KDp-1 HP, James K, Spencer Ass%stant Director, Civil Division IY. 9. General Accounting Office Washington, D. C. 20548 Dear Hr, Spencer: We appreciate the opportunity to camment on the recommendations in the draft audit report, “Qpportunities for Savings by Reducing Noncompetitive Procurement of Commercial-Type Equipment.” As can be seen from the attached comments, the NASA is in full agreement with the objective of the recommendations and we intend to implement operating requirements which will emphasize to contracting and management officials the need to increase competition in the procurement of commercial-type equipment. As is indicated by the report also, we bellieve that the NASA’s procure- mant policy is bas%cally ssannd and we are &I full agreement that purchase requests and equipment specifications should not be unnecessarily restric- tLve. Acsordingly, our e nts are limited to consideration of the recommendations and the steps necessary to implement them. We feel we should point out however, that certain of the procurement examples mentroned fn the report do not necessarily indicate a lack of effective management comtrol over the review and approval of purchase requests, For instance, when equipment meeting specifications is not offered following a solicitation, the schedule for experimentation may force the acquisition of equipment whLch would have been regarded as only marginally acceptable at the time the request was originally approved. The successful performance of the marginal equipment is frequently associated with a margin of risk which may be tolerable only within the context of time and circumstances. We apprecfate your efforts in helping MASA to make its procurement practices more effective and believe that the additional requirements described in the attachment w111 strengthen our procedures,, Sincerely yours, Bernard Horitz Acting Associate trator for Organization agemen t 23 APPENDIX I Page 2 NASA COl4!@3TSOFITpbE GAO DW.P RXPORT TO CONGRESSOR OPPOR%THITIESFOR SAVDES BY R.EEWXNGRONCOI'4PETI~ PR0C~JRWT OF C~CIAEWE EQUIPMEXT The General Accounting Office (GAO) In the draf‘t report titled "Opportu.tx.Lt~es for Savings by Reducing Woncompetitive Procurement of Commerciti-m Equipment," presents two primary recommendations with a tiew to xnproving competitive opportunities by decreasing the use of restrictive specz~fications. It 1s -iIGw!4policy, as set forth in NASA Procurement Regulation, Part 1, Subpart 12, to "state only the a&&. minimum needs of the Government and describe the supplies and sertices in a manner which wxll encourage maximum competition snd etiminate,znsofar as is possible, any restric- tive features which might limit acceptable offers to one supplier's product, or the products of a relatively few suppliers." The regulation also covers policy considerations on the availability of specifications, standards, plans and draw%ngs, and the use of purchase descriptions 811d the use of brand names. The following comments are submxtted regarding the recommendations contained III the report: GAO Recommendation I. Place increased emphasis on the use of specificctr tions wkch call. for acceptable ranges of dimensions, performance, and %her characterlstxs of the minims equipment necessary to fulfill the &vernment"s requirements, We agree that the Government requisitioner should thoroughly justify the use of specxfxcations which set forth restrictively nsrrow ranges of performance, illmensions and other characteristics; or, which establish a reqluerement of a tind or level found In the product of only one or two producers. The use of such specifxcations can be le@timate under certdn compelling circumstances. When specifications prove more restrfc- txve than necessary it is probably more due to striving for engineering or tectical perfection on the part of the reqwsitioner rather than any intent to limit competition. One of the recognizable difficulties that arises, contributing to instances of using a restrictive specification, is the inability of a contracting officer, not clearly in possession of superior technic&I. knowledge, to superimpose his opinion or judgment on equipment require- ments stated to be necessary by a technics3ly qualified initiator of a purchase request. And we believe, as does GAO, that "procurement I 24 APPENDIX I Page 3 personnel should be able to rely upon the branch and tivislon chzefs to adequately fulfill their reviewing responslblllties." Nevertheless, we now l&end to require more than the review and approval by the user's branch and tivislon chiefs by adding the need for a certiflcatlon with concwrence at no lower than dinsion level in the Initiator's organlza- tion that the specaflcataoa as stated employs the widest ranges of characteristics consonant dLth the use envisioned for the equipment, and further, that ;~n the reqasitioner's Judgment no quality or characterlstlc 1s stated 8s a requirement which is not necessary for the adequate performance of the equipment. If such certification cannot be made, then the documentation accompanying the request shall provade full particulars and a Justification for the use of the restrlctlve specifl- cation. Such Justification shall be concurred In at division level. GAO Becommendat~on 2, Whenever specaficatlons are brand name or equal, or have been prepared mth the use of a supplier's catalog, require that the intivldual who prepares the purchase request clearly state that fact and that he furnish a detailed written Justification for using tnis type of spciflcatlon. The certlflcatlon mentloned above ~~11 be expanded to provide notlfica- tlon when a given manufacturer's catalog has been used in preparmg the specification. When this occurs or when specifications are brand name or equal, the documentation accompanying the request knll provide full justlficatlon for the concurrence of the &vision chief. Thus the requisrtioner will be requzred to make a written deterrmnatlon that in his JU nt the use of brand name or equal purchase descriptions or speciflcatlons ~~11 permit adequate competition, that all of the known acceptable brand name products meeting the user's requirements have been listed in the determination In order to maintain the engineering competence demonstrated XI the accomplishment of the USA Msslon to date, we feel that engmeermng personnel must be free to exercise their Judgment in determining needs At the same time, the contractq officer needs to know that such Judgment, considering all aspects, including the need for competition and economy, has in fact been made. We are confident that the certifications and Justrficatrons described above will serve as an effective means to realialm the desired improvement In procurements of the type questioned by GAO, and we ~111 request Center Directors to mplement appropriate procedures umnetiately D. J.@arnett Assistant Adsnnistrator for Industry Af'fa.irs 25 APPENDIX II Page 1 PRINCIPAL OFFICIALS OF THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION RESPONSIBLE FOR THE ACTIVITIES DISCUSSED IN THIS REPORT Tenure of offlce From -To HEADQUARTERS ADMINISTRATOR: George M. Low (actlng) Sept. 1970 Present Thomas 0. Paine Oct. 1968 Sept. 1970 James E. Webb Feb. 1961 Oct. 1968 DEPUTY ADMINISTRATOR: George M. Low Dec. 1969 Present Thomas 0. Pal-ne Mar. 1968 Oct. 1968 Robert C. Seamans, Jr. Dec. 1965 Jan. 1968 ASSOCIATE ADMINISTRATOR Homer E. Newell Oct. 1967 Present Robert C. Seamans, Jr Sept. 1960 Sept 1967 ASSOCIATE ADMINISTRATOR FOR ORGANIZATION AND MANAGEMENT* Richard C. McCurdy Qct a 1970 Present Bernard Morltz (acting) May 1969 Oct. 1970 Harold B. Finger Mar. 1967 May 1969 ASSISTANT ADMINISTRATOR, OFFICE OF INDUSTRY AFFAIRS AND TECHNOLOGY UTILIZATION Daniel J. Harnett act l 1969 Present George J. Vecchlettl (acting) May 1969 Sept. 1969 Phlllp N. Whittaker Aug. 1968 May 1969 Bernhardt L Dorman Jan. 1967 July 1968 26 APPENDIX II Page 2 Tenure of offlce From To - AMES RESEARCH CENTER DIRECTOR: Hans M. Mark Feb. 1969 Present H. Jullen Allen Oct. 1965 Feb. 1969 ELECTRONICS RESEARCH CENTER (note a) DIRECTOR: James C. Elms Oct. 1966 June 1970 GODDARDSPACE FLIGHT CENTER DIRECTOR: John F. Clark July 1965 Present LANGLEY RESEARCH CENTER DIRECTOR* Edgar M. Cortrlght May 1968 Present F. L. Thompson May 1960 May 1968 LEWIS RESEARCH CENTER DIRECTOR: Bruce T. Lundm Nov. 1969 Present Abe Sllversteln Nov. 1961 Oct. 1969 %lectronlcs Research Center was closed as of June 1970. U S GAO Wash, D C 27
Opportunities for Savings by Increasing Competition in Procurement of Commercial Equipment
Published by the Government Accountability Office on 1971-02-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)