COMPUTER PROCUREMENT Information on Defer&e DeDartment’s CAD/CAM L Acquisitions United States GAO General Accounting Of’fice Washington, D.C. 20648 Information Management and Technology Division B-224148 January 19,1989 The Honorable John P. Murtha Chairman, Subcommittee on Defense Committee on Appropriations House of Representatives Dear Mr. Chairman: In a June 1, 1988, letter, your predecessor expressed interest in the extent to which the Defense Department is procuring Computer Aided Design/Computer Aided Manufacturing (CAD/CAM) equipment and whether these procurements are being properly planned and coordi- nated. Also, he requested that we review the Defense Department’s efforts to acquire this technology. During a subsequent discussion with your office, we agreed to provide information on (1) Defense CAD/CAM procurements underway, including the procurement approaches being used; (2) Defense initiatives to consolidate procurements either within or between components, including use of the Navy’s planned CAD/CAM contracts; and (3) the Office of the Secretary of Defense’s (OSD) efforts to guide and coordinate the components’ CAD/CAM procurements. S$opeand Methodology We focused our review on three Defense components-the Army, Air I Force, and Defense Logistics Agency (r&A)-because OSD records indi- cate that the services and DLA are the principal users of CAD/CAM, apart from the Navy. We excluded the Navy from our review because we recently reported on the Navy’s CAD/CAM acquisition1 Within OSD, we focused on the Office of the Assistant Secretary of Defense (Production and Logistics) and the Comptroller of the Department of Defense, the only offices we identified as involved in Defense activity to acquire CAD/ CAMequipment. Our work included interviews with officials in planning, procurement, and review functions. It also included analyses of relevant CAD/CAMplanning and contracting documentation as well as applicable Defense directives and instructions. A detailed explanation of our scope and methodology is contained in appendix I. ‘Corn uter Procurement: Issues Concerning Technical Specification for Navy’s CAD/CAM Acquisition (&-88-U%*, Mar. 3,lQ88), and Computer Procurement: Navy CAD/CAM Acquisition Has Merit but Management Improvements Needed (GAO---22, May 11, 1988). Page 1 GAO/IMTEG89-3Fs Defends CAD/CAM Acquisitione B-224148 Background CAD/CAM is a tool for automating the engineering functions used in designing, manufacturing, and maintaining items such as ships, subma- rines, aircraft, and buildings. With CAD/CAM,a product or item is quickly drawn and easily modified on a computer screen, and the computer can model each drawing before production begins. Following product design, CAD/CAM allows for automated product manufacture and provides a com- puterized record of the product. Using this technology, the cost and time to develop and maintain products can be reduced while product quality and reliability can be enhanced. The Defense Department is a major user of this technology. Plaqned/Ongoing The Army, Air Force, and DLA currently use CAD/CAM equipment, and are Profxrements Serve buying or planning to buy more. None of the three, however, has ongo- ing or planned procurements as large as the Navy’s Mogtly Local Needs The Navy is in the midst of a large CAD/CAM procurement and is planning to award five indefinite-quantity contracts sometime in 1990. Although the Navy has yet to officially specify a dollar estimate for the contracts, commercial estimates are as high as $600 million, The five contracts, one for each of the Navy’s five system commands,2 are intended to pro- vide state-of-the-art, off-the-shelf hardware and software to meet differ- ent users’ needs while also providing standard system features for all commands. The Army had 12 ongoing procurements as of September 30,1988, total- ing about $120 million, including one requirements contract that has a $101 million delegation of procurement authority. Under this contract, the Corps of Engineers is authorized to acquire up to $51 million worth of equipment. Other defense agencies, and the National Security Agency, are authorized to spend up to $50 million in support of architecture, b engineering, or construction functions similar to those of the Corps of Engineers. The Air Force is now in the early stages of defining its long-term CAD/ CAMrequirements. Its ongoing procurements total about $11 million, not including an indefinite-quantity contract with a $114 million delegation of procurement authority to purchase hardware for scientific and engi- neering applications. Some of this hardware will run CAD/CAM software; 2The five system commands are the Naval Sea Systems Command, Naval Air Systems Command, Naval Facilities Engineering Command, Naval Supply Systems Command, and Space and Naval War- fare Systems Command. Page 2 GAO/IMTEG893lT3 Defense’s CAD/CAM Acquisitions E-324148 however, Air Force officials could not specify what portion of the $114 million relates specifically to cAu/cAM applications. DM is a small user with past and planned purchases totaling about $600,000. The components’ procurement approaches vary. Generally, most procurements are being conducted by individual field activities to sat- isfy localized needs. However, the Army and the Air Force each have one centrally managed procurement that can be used by multiple field activities. Additionally, the Air Force and a number of Army commands are examining the technical specification for the Navy’s planned CAD/ CAMcontracts to see if it can be used to satisfy their respective require- ments. (Apps. II, III, and IV contain additional information on Army, Air Force, and DLA procurements, respectively.) SDInvolvement Minimal OSD has encouraged Defense components to use the Navy’s planned CAD/ CAM contracts as a means of satisfying their respective needs. However, according to officials in the Office of the Assistant Secretary of Defense (Production and Logistics), no further OSD involvement is planned. Fur- ther, they do not see a role for OSD in Defense efforts to acquire CAD/CAM, except when a given procurement requires OSD’S approval. Procurements requiring OSD’S approval are those that have total estimated program costs in excess of $100 million, have estimated program costs in excess of $26 million in any single year, or are designated as special interest by CHD. (App. V contains additional information on OSD’S role in Defense actions to acquire this equipment). We discussed the contents of this report with Army, Air Force, DLA, Navy, and 06~ officials, and have incorporated their views where appro- A priate. Our work was performed in accordance with generally accepted government auditing standards. We are providing copies of this report to the Secretaries of Defense, Army, Air Force, and Navy, and to the Director, DLA. We are also provid- ing copies to the House and Senate Armed Services Committees, the House Government Operations Committee, the Senate Governmental Affairs Committee, and the House and Senate Appropriations Commit- tees. We will make copies available to other interested parties upon Page 3 GAO/IMTEC-39-3FS Defense’s CAD/CAM Acquisitions ‘, 5224143 request. This report was prepared under the direction of William S. Franklin, Associate Director. Other major contributors are listed in appendix VI. Sincerely yours, Ralph V. Carlone Assistant Comptroller General Page 4 GAO/JMTEG39-3F’S Defense’s CAD/CAM Acquisitions ‘, Page 6 GAO/IMTM239-3FS Defense’s CAD/CAM Acquisitions Contents Getter Appendix I 8 dbjectives, Scope,and Methodology Appendix II hmy CAD/CAM Procurements Appendix III &r Force CAD/CAM flrocurements ’ ppendix IV 3 16 IA CAD/CAM rocurements I Appendix V @D Role in Defense CIA-D/CAM I+-ocurements 18 b Page 0 GAO/IMTEG89-3FS Defense’s CAD/CAM Acquisitions Tables Table II. 1: Army Materiel Command CAD/CAM 11 Procurements as of September 30,1988 Table 11.2:Corps of Engineers CAD/CAM Procurements as 12 of September 30,1988 Table III. 1: Air Force Systems Command CAD/CAM 14 Procurements as of September 30,1988 Table 111.2:Other Air Force CAD/CAM Procurements as of 14 September 30,1988 Abbreviations CAD/CAM Computer Aided Design/Computer Aided Manufacturing DLL4 Defense Logistics Agency GAO General Accounting Office IMTEC Information Management and Technology Division OSD Office of the Secretary of Defense Page 7 GAO/IMTEC&MFS Defense’s CAD/CAM Acquisition8 L;,.‘ : .‘,_I ,, ‘/ Appendix I Objectives, Scope, and Methodology Interest in the Defense Department’s acquisition of CAD/CAM equipment prompted the former Chairman, Subcommittee on Defense, House Com- mittee on Appropriations, to request that we review Defense efforts to acquire this technology. On the basis of the former Chairman’s request and subsequent discussions with his office, we agreed to provide infor- . mation on l CAD/CAMprocurements that are occurring within Defense components, including the procurement approaches being used; . Defense efforts to consolidate CAD/CAM procurements either within or between components, including the use of the Navy’s planned contracts; and . 0s~‘~ efforts to guide and coordinate the components’ CAD/CAM procurements. In developing this information, we focused on three Defense compo- nents-the Army, Air Force, and DLA. We selected these for two reasons. First, OSD records indicated the services and DLA to be the primary Defense users of CAD/CAM equipment. Second, we recently reported on the Navy’s efforts to acquire this type of equipment.’ Also, in developing this report, we focused on two OSD offices-the Office of the Assistant Secretary of Defense (Production and Logistics) and the Office of the Comptroller of the Department of Defense-because they are the only OSD offices that we identified as having potential involvement in Defense efforts to acquire CAD/CAM equipment. Our review approach included interviews with Army, Air Force, and DLA officials who perform functions relevant to the procurement of these systems, including requirements determination, contracting and contract management, and acquisition oversight. It also included examination of applicable documentation such as studies of components’ current uses L and plans for future acquisitions, contracts, and solicitation documents for procurements currently underway; Defense reports on contract expenditures; and Defense directives and instructions governing the procurement of computer systems such as CAD/CAM. Additionally, our approach included interviews with OSD officials and examination of doc- UmentatiOn germane to OSD’s role in Defense’s procurement of CAD/CAM. Finally, our review included an automated search of the Commerce Business Daily for reference to Defense CAD/CAM procurements, either 1GAO/IMTEC-88-16BR, Mar. 3, 1988; and GAO/IMTEC-88-22, May 11, 1988. Page 8 GAO/IMTEC-39-3F% Defense’s C&D/CAM Acquisitions APP@n-1 Objectivea, Scope, and Methodology requests for proposals or contract awards, announced from February 1986 through September 1988. We performed our work from July 1988 through September 1988, pri- marily at (1) component headquarters offices and OSDoffices in Wash- ington, DC., and (2) selected component field activities. The principal headquarters offices contacted were: . Army: Office of the Director of Information Systems for Command, Con- trol, Communications, and Computers. 9 Air Force: Deputy Chief of Staff for Logistics and Engineering; Deputy Chief of Staff for Command, Control, Communications and Computers. l Defense Logistics Agency: Technical and Logistics Data Division. . Office of the Secretary of Defense: Office of the Assistant Secretary of Defense (Production and Logistics); the Office of the Comptroller of the Department of Defense. We discussed the contents of this report with Army, Air Force, DIA, Navy, and OSDofficials and have incorporated their views where appro- priate. Our work was performed in accordance with generally accepted government auditing standards. Page 9 GAO/IMTEG89SF!S Defense’s CAD/CAM Acquisitions Appendix II Army CAD/CAM Procurements The Army has used CAD/CAMsince the 1970s and is buying more of the technology. As of September 30,1988, it had 12 ongoing procurements, totaling about $120 million, including one requirements contract that has a $101 million delegation of procurement authority and that can be used by the Army and other agencies. The Army’s acquisition approach for its procurements includes both large-scale, centrally managed con- tracts as well as smaller, locally awarded and managed contracts. A number of Army commands are considering whether their future needs can be satisfied by the Navy’s planned CAD/CAMcontracts. The iArmy as CAD/CAM The Army first introduced CAD/CAMto its arsenals and research and development laboratories to aid in the design and development of weap- Useq ons systems. Since then it has employed robotics at depots and ammuni- tion plants as a substitute for humans in potentially hazardous positions, and it has begun using CAM to produce small-caliber ammunition. The Army has two primary CAD/CAMusers-the Army Materiel Com- mand and the Corps of Engineers. The Army Materiel Command, which operates Army arsenals, depots, and other facilities, is the Army’s larg- est user. An Army Materiel Command survey dated April 1988 shows that the Command has invested about $430 million in a wide range of CAD/CAMtechnology. The Army’s other primary user is the Corps of Engineers, which uses CAD for architecture, engineering, and construction functions. Unlike the Army Materiel Command, the Corps does not manufacture equip- ment, machinery, or spare parts, and thus its investment is limited to design and drafting equipment. Ar y Materiel Comrnand Our review identified 10 CAD/CAMprocurements in the Army Materiel Command-6 contracts and 4 requests for proposals (see table II. 1). The Pro1 urements 6 contracts total about $14 million, and the requests for proposals total about $5.5 million. Each of these procurements is being conducted locally by Army Materiel Command field activities. According to the April 1988 Army Materiel Command study, planned investments ~ between 1989 and 1992 will total about $20 million. Page 10 GAO/IMTEC39SFS Defense’s CAD/CAM Acquisitions Appendix II Army CAD/CAM Procurements Tdble 11.1:Army Materiel Command CAD/ C&k! Procurements as of September 30, Dollars in thousands 1988 Contract / Location co%z Awarded? Expenditures’ Watervliet Arsenal $4,653 yes $4,395 Tank and Automotive Command 3,488 yes 86 Redstone Arsenal 4,897 yes 3,076 Redstone Arsenal 503 yes none Redstone Arsenal 233 yes none Redstone Arsenal 114 yes none -_____ Army Depot Anniston 200b,C no none Rock Island Arsenal 2,500c no none Corpus Christi Depot 791G no none Tobvhanna Deoot a 2.oooc no none Total 919,379 , $7.559 I~~. nAs of June 30,1988. bEstimated costs of l-year lease. The contract is planned to have a purchase option. cValues of contracts not yet awarded estimated by activity contracting officials. orps of Engineers Our review identified two Corps of Engineers procurements as of Sep- rocurements tember 30, 1988 (see table 11.2). One of the two is a requirements con- tract with a $101 million procurement limit, intended to fulfill the / design and drafting requirements of all Corps districts. Although a total dollar value is not specified in the contract, the delegation of procure- ment authority limits Corps purchases against the contract to $51 mil- lion, and Corps officials told us that this limit would likely be reached. As of September 1988, 24 of the 39 Corps district offices had submitted purchase orders against the contract totaling $12.1 million. Addition- ally, this contract has a $60 million delegation of procurement authority, h which is available to other defense agencies and the National Security Agency. The other Corps contract is a local procurement for microcom- puter drafting software, which is not available from the requirements contract. Page 11 GAO/IMTEG395J?S Defense’s CAD/CAM Acquisitions Appendix II Army CAD/CAM Procurements Tabldj 11.2:Corpr of Englneere CAD/CAM Procr/remento / ee of September 30,1988 Dollars in thousands / .-..-. Contract Contract I Location Value Awarded? Expenditures’ --____ Corps of Engineers $101,000b yes $6,662 Corps of Engineers, Sacramento District - 43 yes none Total $101,043 $6,662 aAsof June30,1988. bTotal delegation of procurement authority Ar~$y Efforts to The Army is involved in a large-scale, centrally managed CAD/CAM acqui- colqsolidate Procurements sition, and is considering the use of the Navy procurements. The Corps’ requirements contract is available to its 39 district offices, as well as to other defense agencies, and the National Security Agency, with a need the contract can satisfy. Additionally, the Office of the Director of Infor- mation Systems for Command, Control, Communications, and Com- puters has solicited Army commands for interest in participating in the Navy’s planned CAD/CAM contracts. As of September 1988, 11 Army activities had expressed interest in reviewing the Navy’s Request for Proposals when it is available. Page 12 GAO/IMTEC89-3F’S Defense’s CAD/CAM Acquisitions /CAM Procurements The Air Force began using CAD/CAM technology in the 1970s and has con- tinued to acquire the technology. As of September 30, 1988, the Air Force had seven ongoing procurements totaling about $11 million. The Air Force also had an indefinite-quantity contract with a $114 million delegation of procurement authority for scientific and engineering com- puters, which may be used for CAD/CAM. Air Force acquisition strategies include large, centrally managed contracts as well as small, locally awarded contracts managed by field activities, The Air Force is explor- ing opportunities for CAD/CAM procurement consolidation within the Air Force itself and between the Air Force and the Navy. ?ihe Air Force as CAD/ Two Air Force commands acquire the majority of CAD/CAM technology used by the service: the Air Force Systems Command and the Air Force C)lM User Logistics Command. According to a November 1988 Air Force survey, the acquisition cost of the Systems Command’s current CAD/CAMinven- tory is about $9 million, while the Logistics Command’s totals about $43 million. The Strategic Air Command and the Tactical Air Command also use and are acquiring this type of equipment. The Air Force uses CAD/CAM technology for a variety of applications. The Air Force Systems Command’s research laboratories and test centers use it for designing and developing weapons systems. The Air Force Logis- tics Command uses this technology at its five Air Logistics Centers for maintaining aircraft and developing procurement specifications for existing equipment. As of September 30, 1988, the Air Force Logistics Command was not conducting any CAD~ZAM procurements. The Strategic Air Command and the Tactical Air Command use the technology for such applications as reproducing old technical drawings and designing printed circuit boards. b ,ir Force Systems The Air Force Systems Command is conducting one centrally managed ommand Procurenzents procurement, plus several localized procurements (see table 111.1).The centrally managed procurement is an Air Force-wide, scientific and engi- neering workstations, indefinite-quantity contract with a $114 million delegation of procurement authority. This contract provides for the pur- chase of hardware that can be used for a number of applications, includ- ing CAD/CAM. However, according to a Systems Command contracting official, it is not known how many of these workstations will be used for CAD/CAMapplications. The contract is expected to reach its dollar limit in 1989. Page 13 GAO/lMTEG895FS Defense’s CAD/CAM Acquisitions ‘,,!:/,F:’ ,, s’.!.::. ., .. Appendix III Air Force CAD/CAM Procurements Table ill.1: Air Force Syatemr Command CAD/ AM Procurements as of Dollars in thousands Septe ber 30,1988 Contract Contract 1 / Location Value Awarded? Expenditures’ Aeronautical Systems Division, Wright- Patterson Air Force Base $114,30Ob yes $49,401 4950th Test Wing, Wright-Patterson Air Force Base --- 6,924 -- yes none Aeronautical Propulsion and Flight Dynamic Laboratory, Wright- Patterson Air Force Base _--2,465 yes none 6585 -.- Test GroupyEglin Air Force Base ----I__~-___ 228 yes none Total $123,917 $49,401 aAs of June 30,1988. ‘)Delegation of procurement authority 0th’ r Air Force CAD/CAM The Strategic Air Command and the Electronic Security Command are Pro urements each conducting one CAD/CAMprocurement, and the Tactical Air Com- mand is conducting two (see table 111.2).They are all being conducted at field activities within the two commands to satisfy local needs. : Table 111.2:Other Air Force CAD/CAM Proc rements as of September 30,1988 Dollars in thousands Contract Contract Location Value Awarded? Expenditures0 1 Tactical Air Command, Luke Air Force Base $1,224 yes none Electronic Security Command, Kelly Air Force Base 150 yes none Strategic Air Command, Whiteman Air Force Base 97 yes none Tactical Air Command, Shaw Air Force Base -~-_----- 56 no none Total $1,527 aAs of June 30,1988. CL&CAM Procurement The Air Force is exploring ways to consolidate its CAD/CAMprocure- ments. For example, it has established a policy group to formulate a Co@lidation Efforts long-term Air Force acquisition strategy, taking into account the ser- vice’s need for data exchange among users. The policy group plans to issue guidance to ensure that systems acquired will meet certain com- mon standards. The group also plans to evaluate the feasibility of using the Navy’s planned contracts to meet Air Force requirements. Initially, Page 14 GAO/IMTEcS9-3F!3 Defense’s CAD/CAM Acquisitions Appendix ill Air Force CAD/CAM Procurement8 - the Air Force will provide the Navy’s technical specification to its major commands, including the Logistics Command and Systems Command. Those commands will determine,how well their requirements would be met by the Navy contracts. Additionally, the Air Force Logistics Command has a CAD/CAMsteering committee that is surveying the command’s need for a single, command- wide acquisition. The steering committee is evaluating alternative CAD/ CAMacquisition options, including the possibility of using the planned Navy contracts. According to an Air Force Systems Command official, the command has established a steering committee to address CAD/CAM requirements on a command-wide basis. The official added that the committee will be simi- lar to that of the Air Force Logistics Command. The Systems Command does have one representative on the Logistics Command’s CAD/CAM steer- ing committee to informally coordinate between the two commands. Additionally, the Systems Command has an informal review underway to evaluate whether the hardware specifications of the Navy’s planned contracts will satisfy its scientific and engineering workstations require- ments when the command’s current indefinite-quantity workstations contract expires. Page 16 GAO/lMTECX39-9FS Defense’s CAD/CAM Acquisitions Appendix IV * DI& CAD/CAM Fbcurements DLA uses CAD/CAMto a much lesser extent than do the services. Our review identified three DIA facilities that use CAD systems, but identi- fied no ongoing and just one planned procurement of the technology. Because of its small CAD requirements, DL4 is not planning to partici- pate in the Navy’s planned CAD/W contracts, according to the director of DLA’S Technical and Logistics Data Division. DLA +SCAD/CAM User Unlike the services that design and build weapon systems, DLA'S mission / is to supply the services with common items or spare parts. As a result, DLA’S principal need for CAD/CAM is limited to drafting applications used in preparing drawings of the parts it supplies. One DLA user of the equip- ment is the Defense Logistics Service Center, which has a single CAD workstation to incorporate parts drawings in DLA’S catalog of standard parts. Another user, the Defense Electronics Supply Center, uses CAD to explore opportunities for standardizing electronic systems’ components. The third DLA user is a depot in Ogden, Utah, that uses a CAD system in designing and maintaining its buildings. rocurements and DLA’S one planned procurement is for three workstations and has an esti- idation Efforts mated contract value of $117,000. DLA is not planning to participate in the Navy’s CAD&-%M contracts. According to the director of DLA'S Techni- cal and Logistics Data Division, DLA does not need CAD/W equipment as sophisticated as that required by the services. The director cited DLA’S limited CAD needs as justifying DLA’S plans to not participate in the Navy’s procurement. DLA has, however, used the Army Corps of Engi- neers’ contract to acquire $400,000 worth of CAD equipment for the Ogden depot. According to the staff director of DLA'S Office of Installa- tion Services and Environmental Protection, the Ogden depot is serving as a pilot site for testing the use of CAD equipment. Other DLA depots may acquire similar equipment in the future. Page 16 GAO/IMTEG99SFS Defense’s MD/CAM Acquisitions I I, PpeI ij!i5vRole in Defense CAD/CAM Procurements Unless a given CAD/CAM procurement within the Defense Department qualifies as a major System requiring OSD’s a.‘pprOVa&’ OSD does not get involved in the procurement. According to officials in the Office of the Assistant Secretary of Defense (Production and Logistics), apart from the Navy’s acquisition, OSD has not been involved in any Defense procurements specifically for CAD/CAM.In addition, OSD does not have instructions or directives strictly for CAD/CAMprocurements. These offi- cials expressed confidence that the existing regulations governing com- puter system acquisitions are sufficient to guide actions to acquire CAD/ CAM. OSD has encouraged Defense components to use the Navy’s planned con- tracts. In an April 11, 1988, letter, the Assistant Secretary of Defense (Production and Logistics) promoted the idea of using the planned Navy contracts to satisfy CAD/CAM needs of the Army, Air Force, and DLA to the maximum extent possible. Officials in the Office of the Assistant Secre- tary of Defense (Production and Logistics) stated that this letter responded to a perceived opportunity for the services to save time and money by using the Navy contracts instead of developing their own specifications and awarding their own contracts. They foresaw no fur- ther OSD involvement in determining whether the components should buy CAD/CAM, separately or jointly. ‘According to Department of Defense Directive 7920.1, a major automated information system is one that has total estimated program costs in excess of $100 million, has estimated program costs in excess of $26 million in any single year, or is designated as special interest by OSD. OSD exercises its approval authority over these major systems through its Major Automated Information System Review Council. Page 17 GAO/IMTJK%93J?!3 Defense’s CAD/CAM Acquisitions Appendix VI Major Contributors to This &port Inf&-mation Management William S. Franklin, Associate Director, (202) 276-3188 and Technology Division, John B. Stephenson, Group Director Randolph C. Hite, Evaluator-in-Charge Washington, D.C. David R. Turner, Evaluator Gwendolyn A. Dittmer, Evaluator Lisa T. Pittelkau, Evaluator (aloaza) Page 16 GAO/IMTEC-893F’S Defenee’r C4D/C4M Acquidtions ._ _ ._ _ __.. _. .,.. “” I_. I .-
Computer Procurement: Information on Defense Department's CAD/CAM Acquisitions
Published by the Government Accountability Office on 1989-01-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)