DOCUftENT RESUfilE O ~ 6 39 - (A1852811) What GAO Looks Tor. June 8, 1911. 1 pp. Speech by Donald Eirich, Associate Director, Logistics and communications Div. Issue Area: Federal Procurement of Goods and Services ,1900,. Contact: Logistics and Communications Div. Budg e t Function: General Govern.ent: Other General Government (806) • Most of the procurement audit work being done by GAO is being done prior to procurement. congress wants to know whether t~e procurements are competitive, n~c~ssary, and cost effective when sy~tems are in the conceptual stage or as far in advance of the proc'lrement process as is possible. Audit criteria involve agency compliance with Federal directives and the agency's own implementing criteria. A 1977 report on problems founa with G~vern.ent acquisition ana use of computers in procurement audits identified general proble m areas: not adequately deter.ining the scope of work to be performed; no cost-benefit analysis of alternative ways to meet needs; inaccurate assessment of current utilization; acquiring equipment sooner than necessary; procurement without competition; avoidanc~ of authority to delegate procurement resp~nsibility; communications applications n0t identified; and security requ i ra.ents not consider~d. Areas being emphasized in procurement involve: competition, need, expected benefits, costs, privacy protection, and meeting agency needs. (RRS) i_ EIRICH-l WHAT GAO LOOKS FOF ' We were originally asked to talk about post procurement a'u dits. While this used to be the standarci fare of auditors, including GAO, we haven't done much of this in" the past few years so I have shifted the emphasis. Most of the work we have been doing is at the request of Congressmen or congressional committees and most is pre-procurement. However, the audit objectives are essentially tne SJme for both timeframes. The primary concer,'lS of the Congress, as we perceive them, are: Is the procurement co~~titive, ia the new system needed, is it cost effective, can it protect personal privacy and does it meet the agencies needs. So that prerogatives can be exer- cised, the Congressmen want to know these things early--when ~ the systems are in the conceptual stage, or at least as far in advance of the procurement action as they beco~e aware of it. In some case, unfortunately, this has been after the RFP has been released or even after the benc~~ark has been completed. Actually, our approach is straiqhtforwacd. Being auditors, we examine the manner of agency compliance with FMC 74-5, those other directives you have discussed during the past few days, pertinent parts of FPMR 101 and the agency's own i mplement j,ng I I I directives. These are the audit criteria. 701 ~IRICH-2 On occasion, we have questioned or taken exception to the criteria. Fo~ example, we are presently examining into the reasonableness of the 24.7 percent cost of Federal employee retirement benefits, directed for use in OMS Circular A-76 cost comparisons. As another example, we found at one aqency that charges for computer time provided on a reimburs- able basis to other agencies did not include depreciation or overhead, and we recommended that its policy be changed. !I For the most part, thotJqh, we rely on the Government- wide guidance issued by Executive agencies having central ADP management responsibilities and the implementing directives of the agencies. These are the criteria we au1it against. o In March 1977, GAO issued a report on ·Problems Found With Government Acquisition and Use of Computers from November 1965 to December 1976" (FGMS-77-14). This doc~ment contained a complete list of the 175 GAO reports issued during that period, classified into 14 general problem areas, with numerous subsets. Examples of some of the topics related to ADP procurement were: !/ REF: (1) GAO Report "Designation of Lawrence Berkel~y Laboratory Co~puter Facility as a Federal Scitntific Dat~ Processing Center Could Sav~ Millions" (LCD-76-112), 12/30/76 ( 2 ) CG Decision B-136318, 1/~1/77 )2 1_- ./ EIRICH-3 • Not adequately determining the scope of wock to be performed • No cost/benefit analysis of alternative ways to meet needs • Inaccurate assessment of current utilization • Acquiring equipment sooner than necessary • Procurement without competition • Avoidance of GSA authority to delegate procurement 'responsibil ity • Communications applications not identified • Security requirements not con~idered Let me comment on a few of the areas that we are presently ) emphasizing. COMPETITION - You are all aware of a~ extremely difficult problem in pursuin9 full and free competition--how to handle conversion costs in the procurement process. Attempts by agencies to avoid conversion costs has resulted in a large number of so-called interim u~grades-- sole source or limited competition procurements--which have been of considerable concern to the Congress. The Chairman of the House Committee on Government Operations elaborated on a recommendation, in its October 1976 report, !/ in a December 1976 letter to the Administrator, GSA. It said that until ~n aqency's software has heen convected to standardized !/ HR 94-1746 703 EIRICH-4 higher level lanquages, no conversion costs should be considered in evaluating hardware bids. After conversion to higher level languages, incidental out-of-pocket costs may be considered. In attempting to satisfy this requirement, GAO worked with the Depart,ent of Agriculture with GSA's concurrence, to develop a new F:ocurement technique and test it in two pending procurements. t t is a two step process. Some of the key elements in th i; case are: •. Conversi ;'n will be a mandatory option in the RFP i.e .. , mandatocy for the vendor to quote a separate price and optional that the Government accept it. Only the dollar amount ~roposed oy the vendor will be considered in the evaluatio~ of the conversion aspects o f. the ~roposals. • Equipment vendors will be required, under a man- datory option, to offer two persons as conversion monitors, regardless of who receives the conversion o award. • After the ~quipment is selecteo, a second solici- tation will be made to software firms. At this time, the successful equipment vendor will be given the opportunity to give his best and final offer for the convecsion task. • Programs consid&red must be in standard Fortran or Cobal. Where there is a Federal standard, it will apply. Programs !!'lust be running on existing equipment w r ~n the DPA is released. • Vendor uniq · = extensions will be permitted pro- vided that \. l · ~ benefits are established by trade-off an r lysis. Approved extensions will be fully documented. • Recesign and ~" esystemization must be considered in preference to conversion, such as programs originally ~repared for first and second genera- tion equipment. ,-- EIRICH-S Admittedly, this means more work for the Government. We "believe, however, that the benefits of more thorough planning and redesign considerations, standardization and economies will compensate. GAO presently has a draft report out for comment by affected agencies which discus~es reasons for the high con- version costs and ways in which such costs can be reduced. I have spent a disproportionate amount of time on this concept because it is new and, I think, of int e rest to this assembly.!/ GAO expects to be involved in thi s question with other agencies, whose ADP procurements we are asked to ) review. NEED - w~ evaluate the composition of the projected workloads. We review the revalidation of workloads, anticipated growth and estimates for new applications by examining the nature of studies made and documentation down to the user level. We have found regression analysis useful in a variety of situations, both for validation of expected workload growth and for sizing the proposed hardware buy. GAO is on the INFONET, and we use its standard regression analysis soft- ware package. Probably other TS services provide the same feature. We have found proj~cted workloads overstated, \ \ !/ This process is explained in detai~ · in Department of of Agriculture RFP No. dated 705 EIRICH-6 using this technique. Also, 1isk, core and CPU resources can often be extended. We have found instances where ~1stem enhancements, some ioentified by the agency itself, that would expand these capacities and improve the performance of the existing co~puter had not ~een made before initiating a new procure~ent. While recognizing that technology continues to change, GAO, in 1974 issued a report describing ways to improve computer operations in six areas. 1/ EXPECTED BENEFI~S - ,~a look at these closely. We have rejected, from an audit standpoint, broad estimates of increased produc- tivity not supported by detailed justifications. We have accepted other estimates, when broken down to specific () functions and the rationale is adequately described. However, time and motion studies and pilot or protype tests are the best .demonstration of benefits. These are particularly useful where terminals and networks are being planned. COSTS - We examine the estimates of the costs of alternative solutions that wece considered and, sometim~s, other alterna- tives that we consider feasible. Believe it or not, 12 years afte~ the Bcooks Bill, we are s ' 11 examining the lease/ purchase financing alternative. In some cases, where the 1/ Teo1s and Techniques foe Improv i ng the Efficiency of Federal Automatic Data Processing Operat1ons (8-115369) June 3, 1974 1- EIRICH-7 purchase alternative proved advantageous, we found that GSA had sufficient capital in its ADP Fund and were able to direct the agency toward this alternative. PRIVACY PROTECTION - The best way we have found so far to evaluate compliance with this requirement is to examine the existing computer security environment, generally in accordance with the pr.inciples of FIPS PUB. 41. We have found instances where available protections such as personnel and terminal profiles and even passwords have not been implemented in the existing system nor specifically provided for in planning the new system. ) MEETING AGENCIES NEEDS - We observe and 6iscuss the existing and proposed applications on site, at the user level. We look for key indicators of user dissatisfaction--such as the number and nature of unique applications being employed to meet management needs, the existence of supplemental manual or automated systems, reports on backlogs and error corrections and the number and significance of software changes being made Time constraints have permitted only the broadest commen- tary on these audit objectives. We should recogniz~ that GAO's approaches vary considerably according to the scope and character of the ?acticular operation, and the time available for ou~ rev iew. 707 I LL-
What GAO Looks for
Published by the Government Accountability Office on 1977-06-08.
Below is a raw (and likely hideous) rendition of the original report. (PDF)