oversight

Information Technology: DOD's Federal Logistics Data on Compact Disc Program

Published by the Government Accountability Office on 1990-03-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   :,

                        United   States   General   Accounting   Office

                        Report to Congressional Requesters                c




    March   1990
                        INFORMATION
                        TECHNOLOGY
                        DOD’s Federal
                        Logistics Data on
                        Compact Disc Program




i
                   United States
GAO                General Accounting  Office
                   Washington, D.C. 20548

                   National Security aud
                   International  Affairs Division

                   B-236879

                   March 15,199O

                   The Honorable Constance Morella
                   House of Representatives

                   The Honorable Bill Green
                   House of Representatives

                   In response to your joint request, we have reviewed the Department of
                   Defense (DOD) Federal Logistics Data on Compact Disc Program. DOD ini-
                   tiated the program to publish the government’s catalog of logistics infor-
                   mation using a relatively new technology known as Compact Disc Read
                   Only Memory,’ instead of the current media, microfiche. The program
                   was developed and managed by the Defense Logistics Agency and its
                   Defense Logistics Services Center.

                   You expressed concern that a DOD compact disc product would compete
                   directly with Information Industry Association members’ products and
                   that DOD’S plans to procure a compact disc-based catalog was not in con-
                   sonance with laws favoring the use of existing commercial products
                   over the development of new ones by the government.

                   This report addresses (1) the appropriateness of the Services Center’s
                   development of a prototype compact disc system; (2) the Services
                   Center’s management of the prototype project; (3) the Defense Logistics
                   Agency’s plans to procure the software, hardware, and/or services
                   needed to provide a compact disc system and the potential for commer-
                   cial involvement in the procurement; and (4) the impact of the Agency’s
                   decision to include business or otherwise sensitive data in the product
                   on its acquisition approach.


                   The Services Cent,er’s initiation of the prototype development project
Results in Brief   was appropriate. Although DOD is required under its acquisition statutes
                   to acquire existing commercial products to the maximum extent practi-
                   cable rather than develop new ones, a DOD organization must define its
                   needs before acquiring any product. The Services Center initiated the
                   prototype project to define its needs (see app. 11).

                   The Services Center used complex contractual arrangements in manag-
                   ing the prototype project. Some of these arrangements did not comply

                   ‘Readonly memorymeant t bedata are stampedon the disc and cannot be erasedor altered.



                   Page 1                                           GAO/NSIAD90-101     Information Technology
B-236979




This report was prepared under the direction of Donna M. Heivilin,
Director, Logistics Issues (275-8412). Other major contributors are listed
in appendix IV.




Frank C. Conahan
Assistant Comptroller   General




Page 3                                  GAO/NSL4D-90.101   Information   Technology
contents




 Abbreviations

CD-ROM     Compact Disc Read Only Memory
 DLA       Defense Logistics Agency
 DOD       Department of Defense
 GAO       General Accounting Office


 Page 6                              GAO/NSL4LH@lOl   Information   Technology
                                         Appendix1
                                         Introduction




                                         specific needs as well as provide additional data not included in the sys-
                                         tem. For example, the Navy data identify items that require special han-
                                         dling or have a security classification.

                                         After DOD initiated the program, the Information Industry Association,
                                         representing some of the commercial CD-ROMvendors, raised concerns
                                         about DOD developing a product that would compete directly with their
                                         products. The Association believes WD'S plan to procure a CD-ROMbased
                                         catalog is not in consonance with laws favoring the use of existing com-
                                         mercial products rather than the development of new ones.


                                         CD-ROMtechnology is used to provide easy and fast retrieval of large
Technology Used to                       amounts of catalog information to DOD users. Since each compact disc
Implement the                            has a capacity of over 640 megabytes, one disc can hold as much infor-
Program                                  mation as about 200,000 single-spaced type-written pages or 2,700
                                         microfiche cards. The data are easily retrieved from the disc using a
                                         personal computer connected to a compact disc drive.

                                         Figure I.1 shows the equipment (personal computer and disc drive) used
                                         to access the data on a compact disc.

Figure 1.1: How a Compact Disc Product
Is Use d




                                          Data are retrieved from a compact disc like music is retrieved from a
                                          phonograph record. The disc spins on a turntable inside the disc drive.
                                          However, instead of using a needle to read the disc, the disc drive uses a



                                          page7                                  GAO/NSIALMO-101Information   Technology
                                                   Appendix I
                                                   Introduction




Figure 1.2: How a Compact Disc Product Is Made
                   Data Preparation Phase




                                   4

                                 Data
                              Processing ’

                                             __,             Keylng   + Organlring    t FormattIng


                                                                                                          7,
                   Disc Manufacture Phase




                                                   Representatives Constance Morella and Bill Green asked us to respond
Objectives, Scope,and                              to numerous questions on DOD’S Federal Logistics Data on Compact Disc
Methodology                                        Program. After discussions with their staffs, we grouped these ques-
                                                   tions into five areas:

                                             m the appropriateness of the Defense Logistics Services Center’s develop-
                                               ment of a prototype CD-ROM system to disseminate its catalog
                                               information:


                                                   Page 9                               GAO/NSIAD90-101   Information   Technology
        Appendix1
        Introduction




        Secretary of Defense and analysts at the Services Center and reviewed
        DLA's acquisition justifications. We also obtained information about the
        quantity of sensitive data to be included in the product, DOD's plans to
        prevent unauthorized disclosure of the data, and DLA'S justification for
        its acquisition strategy.

        We performed most of our work from November 1988 through August
        1989 at the following locations in accordance with generally accepted
        government auditing standards:

l       Office of the Secretary of Defense, Washington, D.C.;
l       Defense Logistics Agency, Alexandria, Virginia;
.       Defense Logistics Services Center, Battle Creek, Michigan;
.       Defense Applied Information Technology Center, Alexandria, Virginia;
0       Advanced Systems Development, Inc., Alexandria, Virginia;
l       Defense Supply Service, Washington, D.C.;
9       Naval Supply Systems Command, Washington, D.C.;
l       Navy Publishing and Printing Service offices, Mechanicsburg, Penn-
        sylvania, and Washington, D.C.;
.       Reference Technology Incorporated, Boulder, Colorado;
l       Library of Congress, Washington, D.C.;
l       CD-ROM technical seminar, sponsored by Hewlett-Packard     and Phillips-
        DuPont Optical, held in Crystal City, Virginia;
.       Special Interest Group on CDKOM Applications and Technology seminar,
        sponsored by the 1J.S.Geological Survey, Reston, Virginia; and
    l   Information Industry Association, Washington, D.C.




        page11
                                                            -
                              Appendix Il
                              The Prototype   Development       Project




                              from the specifications, and, therefore, considered them to be
                              nonresponsive. The Services Center found no basis for determining
                              whether the third bidder’s price was reasonable.

                              In July 1987, the Services Center returned to its original plan to produce
                              a prototype of a CD-ROMsystem. The prototype included information
                              taken from the Federal Catalog System, and the Services Center worked
                              with the services to also include catalog data they maintained sepa-
                              rately. According to the Services Center, the prototype project was com-
                              pleted in January 1989.


                              The Services Center began prototype development work in July 1987
Approach
-        _Used
           - to               and distributed the first test product to 67 test sites by February 1988.
L)evelop   the   ~‘rototype   The test product, consisted of two compact discs containing Federal Cat-
                              alog System data plus supplemental data provided by the Navy, and the
                              software needed to retrieve and display the data. About every 3 months
                              the Services Center distributed an updated prototype product to an
                              expanding number of test sites that reached 250 by July 1988. Each
                              updated disc included more data files and/or capabilities. For instance,
                              Air Force-unique data files were added to the May 1988 product and
                              Army-unique data files were included on the July 1988 product.

                              The Services Center worked with the services throughout the develop-
                              ment phase. For instance, prior to production of the July 1988 product,
                              the Services Center and the Army worked together to develop data pre-
                              sentation, manipulation, and retrieval capabilities for the Army field
                              user. Similarly, the Services Center worked with the Navy and Air Force
                              to ensure the prototype product satisfied their individual requirements.
                              The Services Center also developed and incorporated in the prototype
                              product enhancements that were often based on suggestions and other
                              feedback from test site users.

                              Table II.1 summarizes the information on when data files were added,
                              system capability was enhanced, and the number of test sites.




                              Page 13                                     GAO/NSIAD-SO-101   Information   Technology
               Appendix II
               The Prototype   Development   Project




               Even though the Services Center’s decision to develop a prototype was
Contractual    appropriate, the contractual arrangements used to carry out the devel-
Arrangements   opment work were complex and not always appropriate. The Services
               Center obtained contractor support through the Defense Applied Infor-
               mation Technology Center and the Navy Publishing and Printing Ser-
               vice. During the life of the project, these organizations, in turn, entered
               into a series of complex contractual arrangements on the Services
               Center’s behalf. Figure II. 1 describes the key organizations involved and
               the primary contractual arrangements used.




               Page 15                                 GAO/NSIAD-g&101   Information   Tedmology
                           Appendix II
                           The Prototype   Development     Project




                           Network agreement This agreement enabled the Services Center to continue uninterrupted        develop-
                           ment work wrth Reference Technology

                           ‘The Lrbrary of Congress entered Into Federal Library and lnformatron Network agreements with sev-
                           eral contractors under a delegatron of procurement authonty from the General Serwces Admmlstratro”
                           Federal libraries and mformatlon centers could order rnformatron retrreval servrces through InformatIon
                            Network agreements by rssulng purchase or dellvery orders against the agreements

                           ’ Tresp Assocrates, Inc IS a contractor at the Technology Center Its responsib!lltres were to proude
                           mamtenance and technrcal support servwes The Technology Center used the Tresp contract to obtan
                           prototype development support from Reference Technology when the Advanced Systems’ contract with
                           Reference Technology ended I” March 1988

                           F Control Data Corporatlo” also operated a laboratory under contract to the Technology Center The
                           Technology Center used thus contract to obtarn prototype development support from Advanced Sys~
                           terns’ employees while Advanced Systems’ contract was bang phased out

                           “Reference Technology Incorporated IS a small computer support serwce company located I” Boulder,
                           Colorado The company prwded the mqorrty of the prototype development technical support



                           Not only were the contractual arrangements complex, but also adequate
Internal Control           control techniques were not followed for the prototype project. Effective
WeaknessesAffected         internal controls should help managers to, among other things, comply
Management of              with applicable laws and policies, accurately account for revenues and
                           expenditures, and safeguard resources against waste, loss, and misuse.
Prototype Effort           Effective internal controls systems also provide management with
                           assurance that program goals and objectives are met. We found that
                           some acquisition and contracting practices were not in consonance with
                           applicable laws and regulations, and due to inadequate management
                           controls over funding and costs, the Services Center spent about
                           $145,000 inappropriately.


Improper Acquisition and   The contracting practices of federal agencies are governed by the provi-
Contracting Practices      sions of the Competition in Contracting Act, which is implemented in the
                           Federal Acquisition Regulation. The regulation, for instance, requires
                           that exceptions to the statutory requirements for competition stated in
                           the act be justified and approved at a level above the contracting
                           officer;and specifically precludes the acquisition of supplies or services
                           from another agency for the purpose of avoiding the regulation’s
                           requirements for competition. In addition, the regulation requires that
                           Small Business Administration 8(a) contracts require that the contractor
                           obtain contracting officer and Small Business Administration approval
                           of subcontracts.




                           Page 17                                                  GAO/NSlAD40-101       Information    Technology
                                Appendix II
                                The Prototype   Development   Pn+ct




                                effort to continue uninterrupted. The multilevel contractual arrange-
                                ments used to facilitate the mission of the Technology Center were dis-
                                established with the closing of the Center in September 1989. DLA has
                                since justified, in accordance with the Federal Acquisition Regulations, a
                                sole-source acquisition for interim prototype support until the competi-
                                tive acquisition can be completed.

                                DOD  further stated that the Library of Congress Federal Library and
                                Information Network agreement was utilized by the Printing Service to
                                pursue the required services for DLA. The Library of Congress
                                encouraged the use of this umbrella-type agreement by federal activities
                                to obtain compact disc read-only-memory library services. The Printing
                                Service believed that these services were available under a Library of
                                Congress contractual arrangement that was competitively awarded to
                                contractors providing information-handling services. The Printing Ser-
                                vice, therefore, believed that any sole-source justifications or any other
                                necessary contracting requirements were handled by the contracting
                                officer at the Library of Congress. The Printing Service believed that
                                they were within the regulations and when they learned that the
                                 arrangement appeared t,o be questionable, the Printing Service ceased
                                using the Network agreement.


Inadequate Management            The Services Center did not properly employ internal control procedures
                                 to ensure that prototype development project funding and costs were
Controls Over Funding and
r-l--L-
LAJSLS
                                 properly accounted for and resources were used in an efficient and
                                 effective manner. We found that the Services Center expended about
                                 $145,000 inappropriately as follows:

                            l The Services Center did not reconcile all of the funds authorized with
                              actual project expenditures. It did not know how the Technology Center
                              spent funding authority used between July 1987 and October 1988. In
                              addition, the Services Center was unaware that in August 1988 the
                              Technology Center used $43,000 of funding authority intended for the
                              prototype project for other unrelated Control Data Corporation work.
                            . The Services Center paid about $77,000 in overhead charges to the
                              Printing Service and the Library of Congress to obtain prototype and
                              interim product development services from Reference Technology.
                              These charges could have been avoided if the Services Center had gone
                              directly to Reference Technology by justifying a sole-source arrange-
                              ment when Advanced Systems subcontract with Reference Technology
                              ended. IIowever, using a sole-source arrangement would have inter-
                              rupted development work with Reference Technology. The charges the


                                 Page 19                                 GAO/NSlAD90-101   Information   Technology
Appendix III

Planned Competitive Acquisition


                      1. What is DLA'S current acquisition strategy‘? What is the extent of pos-
Questions             sible commercial involvement in DLA'S acquisition of a CD-ROM based cata-
                      log system? What alternatives did DLA consider?

                      2. What is the current status of the acquisition?

                      3. How much business or otherwise sensitive data is included in the Fed-
                      eral Logistics Data on Compact Disc system? What impact does this have
                      on DLA'S acquisition strategy?


                      The Government Printing Office, on behalf of DLA, recently issued a
DLA’s Acquisition     request for proposals for acquiring a CD-ROM based catalog system. DLA
Approach, Extent of   officials indicated this acquisition approach would provide for full and
Commercial            open competition and the maximum extent of commercial involvement.
                      This could include data preparation, disc manufacturing, and software
Involvement, and      production.
Alternatives
                      Over an 18-month period, DLA considered three alternative approaches
Considered            for acquiring a CD-ROM based catalog system. One approach involved
                      allowing users to obtain existing commercial products. Another
                      approach involved acquiring commercially developed software to enable
                      the Services Center to prepare the data for inclusion on the compact
                      discs, after which a commercial contractor would manufacture the discs.
                      The third approach involved contracting with a single commercial
                      source for the software and services needed to prepare the data, manu-
                      facture the disc, and use the CD-ROM based catalog system.

                      DLA  decided not to pursue the first approach for several reasons.
                      According to DLA, commercial products do not contain sensitive data
                      needed by government users. The products could accommodate sensitive
                      data. However, the use of multiple commercial products would not pro-
                      vide DOD users with the assurance of a standardized system, consistency
                      of logistics data, or compatibility of hardware and software. DLA offi-
                      cials also said that it would be difficult to monitor the quality of the
                      data and the unauthorized disclosure of sensitive data in multiple com-
                      mercial products.

                      On the other hand, DLA actively pursued the other two approaches. Both
                      approaches included opportunities for commercial involvement. DLA'S
                      initial approach, beginning in February 1988, was to provide the Ser-
                      vices Center with an in-house production capability. It involved acquir-
                      ing commercially developed software to be used by the Services Center


                      Page21                                   GAO/NSIAD-90-101lnfo~ationTechnology
                            Appendix III
                            Planned Competitive   Acquisition




                            publication services for the government. The Office’s acquisition respon-
                            sibilities included reviewing industry comments on product specifica-
                            tions, revising them as necessary, and preparing a request for proposals
                            for the commercial service contract. The request for proposals was
                            issued on November 3. 1989.l


                            According to DLA officials, the decision to include business or otherwise
Sensitive Data and          sensitive data has had no impact on the acquisition strategy. DLA plans
Impact on Acquisition       to include sensitive data, which are not releasable to the public, in the
Strategy                    CD-ROMbased catalog system. Sensitive data refer to information that is
                            proprietary to a manufacturer or supplier and data which are not con-
                            sidered sensitive alone but sensitive when combined. The Federal Logis-
                            tics Data on Compact Disc Program product will include the following
                            data considered sensitive:

                        l approximately 250,000 proprietary item descriptions;
                        l North Atlantic Treaty Organization items; and
                        . 50,000 Navy-coded items that are considered sensitive when combined.

                            Commercial CD-ROMbased catalog products do not include this type of
                            sensitive data. For this and several other reasons previously discussed,
                            LLA did not consider the use of more than one commercial product to be
                            a viable alternative for meeting its requirements.

                            DLA currently   controls sensitive data in microfiche products by restrict-
                            ing the use, release, transfer, sale, and distribution of the products to
                            authorized users. A I)I.A official said it would be more difficult and
                            costly to monitor compliance with these controls when more than one
                            commercial vendor of (‘I)-ROM products has access to sensitive data. For
                            example, DI,A would need to monitor multiple vendors to ensure that the
                            CD-ROM discs were dist,ributed only to authorized users, and that the
                            master discs were protected and destroyed. According to a DLA official,
                            the costs associated with this additional monitoring have not been
                            determined.

                            ‘The GovwmnentPrintmg Office ha?hmceissuedan amendmentsuspendingthe requestfor propos-
                            als indefinitrly. This action was taken after the Industry Associationfiled two protestsat the General
                            SerwresBoardof ContractAppwls agamstthe prototype developmentand the requestfor proposals.
                            Both protestshave beendlsmlswd, although the protest againstthe requestfor proposalscould be
                            remstated As of Febnwy 7. 1QHO.      DIh had a requestfor a delegationof procurementauthority
                            under section 111of the Fvdcral I’ropwty and Administrative ServicesAct, 40 U.S.C.759, pendingat
                            the GeneralServicesAdmimhtwmn. This scchon,popularly known asthe BrooksAct, providesthe
                            Admmistrator of GeneralS~~nvcsthe authonty to overseethe acquisition of automateddata process-
                            mg?qnipmtw by federal ag,‘mKY



                            Pagr 23                                              GAO/NSIAD-SO-101      Information   Technology
Appendix IV

Major Contributors to This Report


                            George A. Jahnigen, Assistant Director, (202) 275-8412
National Security and
International Affairs
Division,
Washington, D.C.

                            Sharon E. O’Neil, Evaluator-in-Charge
Detroit    Re@onal Office   GeorgeW.Moore,Evaluator
                            Dea i% Crittenden, Evaluator
                            Myron M. Stupsker, Evaluator

                                                                                                            -
                            John A. Carter, Senior Attorney
Office of the General
Counsel




(391622)                    Page 24                                 GAO/NSL4B!W-101   Information   Technology
                         Appendix III
                         Planned Competitive   Acquisition




                         to complete the data preparation phase at its facilities. Under this
                         approach the Services Center would contract for services to carry out
                         the disc manufacture phase. According to DLA, they discontinued this
                         effort due to the Services Center’s limited experience with CD-ROM
                         technology.

                         In April 1989, DLA began pursuing its second approach-contracting
                         with a single commercial vendor for the software and services needed to
                         make and use a CD-ROMbased catalog system. Essentially, this approach
                         involved contracting out both the data preparation and disc manufac-
                         ture phases. DLA officials stated that this approach would enable them
                         to benefit from commercial industry’s knowledge of CD-ROMtechnology
                         and its applications, and it satisfied DLA'S objective of establishing a CD
                         ROM system with the least amount of risk to the government. In addition,
                         this approach provided maximum opportunities for commercial involve-
                         ment in the final acquisition.

                                                       -
                         DLA's procurement procedures describe the actions which must be taken
Acquisition Status       to support a competitive procurement. Among other things, the proce-
                         dures require that DLA (1) develop a specific project plan, including mile-
                         stones, for key events, (2) evaluate available alternatives for obtaining
                         the required services, and (3) establish specifications or performance
                         standards for the services to be acquired. DLA prepared studies, analy-
                         ses, and plans required by the procedures. Specifically, DLA has

                     l prepared documents (Le., a project plan, a requirements analysis, a com-
                       parative cost and economic analysis, and a market survey) which pro-
                       vide information on the strategy, approach, and milestones for acquiring
                       the CD-ROMbased catalog system;
                     . released draft specifications on the proposed commercial service con-
                       tract for comment by industry; and
                     . defined responsibility for managing the acquisition within the agency
                       and established milestones for completing the acquisition.

                         DIA did not complete some of these documents until after we completed
                         our field work. Therefore, we did not evaluate their quality and
                         completeness.

                         In July 1989, DLA transferred the acquisition responsibility to the Gov-
                         ernment Printing Office, which is responsible for procuring printing and




                         page22                                  GAO/NSIAD-SO-101   Information   Teclmo~ogy
    Appendix II
    The Prototype   Development   Project




    Services Center paid to the Printing Service and the Library were for
    administrative services, such as providing the form to periodically
    transfer funding authority to the Library and paying Reference Technol-
    ogy invoices.
l   The Services Center, through the Printing Service, paid Reference Tech-
    nology about $25,000 to purchase items not authorized under the com-
    pany’s Information Network agreement. This included payments for
    travel expenses, computer software, and CD-ROM disc drives for the com-
    pany’s own use. According to a Printing Service representative, neither
    the Printing Service nor the Library of Congress reviewed the invoices,
    but relied on the Services Center to review them. A Services Center offi-
    cial said the Services Center’s review of invoices did not include verify-
    ing whether payments were for items authorized under the Information
    Network agreement.

    DOD  acknowledged that some problems did exist in management controls
    over funding and costs. According to DOD, the Services Center did not
    perform a full reconciliation of funds as the project progressed, but
    added it was now planning to do so. DOD also said the $77,000 overhead
    change was paid to the Printing Service and the Library of Congress to
    proceed in the most expedient and economical manner. DOD believed that
    the $77,000 included the cost of other services, such as wrapping, pack-
    aging, labeling, and distributing the data discs. However, our analysis
    showed that these services were not included in the overhead charges
    and were billed separately.

    On the purchase of unauthorized items, DOD believed that the goods and
    services were within the scope of the Information Network agreement
    and the Library of Congress was responsible to review the appropriate-
    ness of the purchases.




    Page 20                                 GAO/NSIAD-90.101   Information   Technology
  Appendix II
  The Prototype   Developmrnt   Project




  We found the following:

. Advanced Systems’ contract required written approval of any subcon-
   tracts by the contracting officer and the Small Business Administration.
   Advanced Systems never obtained these approvals for its subcontract to
   Reference Technology.
. When the Advanced Systems contract was being phased out, the Tech-
   nology Center continued some of the prototype development effort by
   ordering Tresp Associates to award a subcontract to Reference Technol-
   ogy, and issuing an order to Control Data Corporation, which awarded a
   subcontract to Advanced Systems. A Technology Center official said the
   subcontracts were awarded only when Tresp Associates and Control
   Data Corporation determined that they did not have the needed soft-
   ware or sufficient technical expertise among their staffs to continue
   work on the project themselves. However, DOD records indicate that
   these actions were taken in the expectation that the subcontracts to Ref-
   erence Technology and Advanced Systems would be awarded. For
   instance, a record of a Services Center employee’s trip to Reference
    Technology showed that the work covered by the Tresp Associates sub-
    contract had already been completed by Reference Technology at least a
    week before the subcontract was awarded. The Technology Center order
    to Control Data Corporation specifically stated that prototype work con-
    tained in the order would be accomplished by the same laboratory oper-
    ated by Advanced Systems that performed the previous work.
    Subcontracting efforts like these are, in essence, sole-source acquisitions
    and should have been considered and justified as exceptions to the stat-
    utory requirements for competition.
 . The Printing Service obtained services from Reference Technology
    through an Information h’etwork agreement without either justifying
    the noncompetitive acquisition of the services or conducting a
    competition?

   DOD concurred with our finding that some of the acquisition and con-
   tracting practices used were not in consonance with applicable laws and
   regulations. It noted that closer oversight by the contracting officer
   could have resulted in better compliance.

   DOD   commented that the Technology Center was established to expedite
   new development efforts, such as the compact disc program. The availa-
   bility and use of subcontracting arrangements allowed the prototype




   Page 18                                  GAO/NSL4D-90.101   Information   Technolo~
                                       Appendix II
                                       The Prototype   Development    Project




Figure 11.1:Contractual Arrangements
Used to Support the Prototype
Development Project




                                       AThe Defense Applied lnformatlon Technology Center housed several laboratotles It was establlshed
                                       by DLA, the Offlce of the Secretary of Defense, and the Jotnt Chiefs of Staff as a joint cooperatwe
                                       actiwty to (1) provide an environment to explore the appllcatlon of new InformatIon technologies of ben
                                       eflt to DOD and (2) establish arrangements under which technologies can be economically developed,
                                       prototyped introduced. and deployed

                                       The Serwxs Center requested the Technology Center to develop the prototype software and produce
                                       the first prototype product to be dlstrlbuted to test s&s The Technology Center then assigned the
                                       prototype development protect to a laboratory operated by Advanced Systems Development, Inc

                                       h Advanced Systems Development Inc operated laboratories under contract to the Technology Center
                                       This contract was awarded under the Small Bwness Admlmstratlon s Sectton 8(a) program for socially
                                       and economlcatly disadvantaged businesses

                                       Advanced Systems performed work on a number of tasks under Its contract to the Technology Center,
                                       lncludmg the prototype protect It subcontracted most of the prototype development work to Reference
                                       Technology Incorporated because It did not have the software necessary to carry out the data prepara-
                                       tlon phase or a capabIlIty for the disc manufacture phase of the prototype project Advanced Systems’
                                       work primarily involved managing the prototype protect, determlmng product requirements, and prepare
                                       mg spewI studies

                                       Advanced Systems’ contract wtth the Technology Center was gradually phased out between April 1988
                                       and January 1989 for several reasons lncludlng Its InabMty to attract a sufflclent number of protects
                                       from DOD organlratlons

                                       ‘The Navy Publlshlng and Printlrlg Sewce IS the central publlshlng and pnntlng organlratlon serwng
                                       the Navy From the begInnIng of the prototype development project, the Services Center had requested
                                       the Prlntlng Service to procure services for productton of the second and subsequent prototype
                                       updates When the Technology Center could no longer prowde software development support, the Ser-
                                       vices Center requested the Prmtlng Service to expand Its role to procure this support The Prlntlng
                                       Service obtaned both productlon and software development services from Reference Technology by
                                        issuing an order to Reference Technology under a Library of Congress Federal Library and lnformatlon




                                       Page 16                                                 GAO/NSIAD-SO-101      Information   Technology
                                           Appendix Il
                                           The Pmmtype   Development   Project




Table 11.1:Information on Prototype Data
Files, Capabilities, and Test Sites                                                                                            Number of
                                           Date            Data~.files included
                                                                          -__-~             Enhancements                        test sites
                                           ieb.1988
                                           -._               Federal Catalog and Navy       Not applicable                               67
                                           May 1988          Federal Catalog, Navy, and     None
                                                             Air Force                                                                 183
                                           July 1988         Federal Catalog, Navy, Air     Improved data manrpulation
                                                         ..~.Force, and-- Army
                                                                            ~-.__~-         and presentatron                           250
                                           Oct. 1988         Federal Catalog, rncluding     Improved and expanded
                                                             characteristics data, Navy,    processing capabrlity and
                                                             Air Force, and Army            Increased retrieval speed                  250
                                           Jan. 1989         Same as Oct. 1988              None                                       250


                                           According to the Services Center, it finished some additional work sub-
                                           sequent to the project’s completion date, including work on the capabil-
                                           ity to transfer data to other media, such as on-line systems and
                                           computer floppy discs.

                                           The Services Center planned to provide quarterly “interim product”
                                           updates to the 250 test sites beginning in April 1989 until the competi-
                                           tively acquired product becomes available. As of February 1990, three
                                           updates have been provided.

                                           The cost to develop the prototype was $1.74 million. About $0.96 million
                                           was for development, manufacture, and distribution of the prototype
                                           system to test sites. The remaining $0.78 million was for equipping test
                                           sites with CDROM disc drives and software licenses.


                                           The Services Center’s initiation of the prototype development project
Appropriateness of                         was appropriate and consistent with its responsibility to publish the
the Prototype                              federal catalog. Two statutes2 require DOD to ensure that it will use
Development Project                        existing commercial products to fulfill its needs instead of developing
                                           new ones to the maximum extent practicable. These statutes presume
                                           that a DOD organization’s needs are known. The Services Center initiated
                                           the prototype project to identify its requirements. The requirements to
                                           be determined included which data files should be incorporated into the
                                           product and the best ways in which this data should be manipulated,
                                           retrieved, and presented to users.




                                           ‘The statutes cited are 10 1I.S.C.2301and 2325



                                           Page 14                                            GAO/NSIAD-ml01     Information   Technology
Appendix II

The Prototype Development Project


                        1. What events preceded the Services Center’s development of the
Questions               prototype?

                        2. What approach did the Services Center use to develop the prototype?
                        What was the cost of the project?

                        3. Was the Services Center’s initiation of the prototype development
                        project consistent with laws governing the use of existing commercial
                        products?

                        4. What contracts were used to develop the prototype?

                        5. How well was the contracting effort managed?

                                                --.
                        The Defense Logistics Services Center began researching optical disc
Events Leading to the   technology, which is the parent of CD-ROMtechnology, to store catalog
Development of a        information in 1981. In September 1985, the Services Center was
Prototype               requested to investigate using the technology to store and disseminate
                        its catalog of logistics information.

                        In January 1986, as part of its investigation, the Services Center
                        released a request for information to industry for information on the
                        development of software and hardware to produce an optical disc prod-
                        uct, from which it received eight responses. The Services Center decided
                        the development of a prototype would enable it to demonstrate the
                        anticipated benefits of the technology. Benefits of implementing optical
                        disc technology included increased productivity for an estimated 30,000
                        users and reduced user error rat.es.

                        In August 1986, DLA gave the Services Center the authority to proceed
                        with a prototype project of the Federal Catalog System by working with
                        the Advanced Concepts Laboratory at Mather Air Force Base. About 4
                        months later, however, the Laboratory withdrew from the project when
                        neither it nor the Services Center could agree on the amount of work the
                        Laboratory would perform.

                        In May 1987, the Services Center requested competitive bids for an off-
                        the-shelf’ product containing data from the Federal Catalog System.
                        Although three bids were received, no contract was awarded. The con-
                        tracting officer determined that two of the three bids had deviations

                        ‘Off-the-shelf meansa produc’r
                                                    pnxlured and/or sttrked by a <antractoror distributor.



                        Page 12                                            GAO/NSIAtHM-101 Information Technology
    Appendix1
    Introduction




l the Services Center’s management of the prototype project;
. DLA'S plans to procure the software, hardware, and/or services needed
  to provide a CDROM system;
. the potential for commercial involvement in DLA'S procurement of a CD-
  ROM system; and
l the impact of DLA'S decision to include business or otherwise sensitive
  data in the product on its acquisition approach.

    To determine whether DoD'S initiation of the program was appropriate,
    we reviewed the Services Center’s compliance with federal laws and reg-
    ulations and DOD policies pertaining to DOD's development of new prod-
    ucts instead of using existing commercial products. In addition, we
    obtained the Services Center’s justification for initiating the program.

    As part of our review of the Services Center’s management of the proto-
    type program, we assessed the actions taken by the Services Center and
    the organizations through which it obtained prototype development sup-
    port, the estimated cost of the prototype, and compliance with federal
    laws and regulations. To do this, we analyzed the contractual instru-
    ments, funding authorizations, invoice charges, and other information
    relating to prototype development. In addition, we interviewed officials
    at the Services Center, at the organizations that provided prototype sup-
    port, at a contracting office, and at contractor facilities.

    To evaluate the approach the Services Center used to develop the proto-
    type, we analyzed contractor invoices and prototype development plan-
    ning documents, statements of work, correspondence and visit reports
    prepared by the Services Center, DLA, and the military services. We also
    interviewed project officers at the Services Center.

    We reviewed past and current DLA plans and actions to procure the soft-
    ware, hardware and/or services needed to provide logistics data on the
    CDROM media. We interviewed DOD and DLA officials and reviewed and
    analyzed correspondence and acquisition documents including specifica-
    tions and option studies, and other information.

    To determine the potential for commercial involvement in each step of
    the production process of a CD-ROM based catalog system, we reviewed
    and analyzed CD-ROM industry trade publications, interviewed industry
    representatives, and attended CD-ROM technical seminars.

    In assessing the impact of including business or otherwise sensitive data
    in the CD-ROM product, we interviewed officials from the Office of the


    page10                                 GAO/NSIAD9o-1O1Info~tionTefhnology
Appendix I
Introduction




laser beam. The laser beam shines on the revolving disc resulting in
reflections of light. These reflections are detected by the disc drive as
light bursts, which are transmitted by electrical impulses to the personal
computer. With the assistance of computer software, the computer
transforms the impulses into detectable images.

Making a compact disc product usually involves two processing phases:
data preparation and disc manufacture. Data preparation is the process
used to prepare the data for inclusion on the compact disc. In this phase,
data are collected in one central location and, generally, entered into a
computer databank for storage on magnetic tape. Depending on the type
of computer the data are stored in, the data on tape may need to be
changed to another format before further processing can continue. With
the use of special software, the programmer places instructions, called
keys, in the data and organizes it for fast retrieval by the computer.
Next, before the data are manufactured into a compact disc, they are
formatted using a standardized process so the final compact disc may be
used in any compact disc drive.

Disc manufacture (i.e., making the actual compact disc) is simply a man-
ufacturing process. A compact disc mold, or master disc, is made by
engraving pits in the surface of a 4-S/4 inch glass disc using a laser light
beam. The master disc is then used to stamp replica discs from hard
plastic, and is later covered with a reflective coating. Finally, the replica
discs are packaged in flat plastic boxes and distributed to users.

Figure I.2 shows the individual steps included in the data preparation
and disc manufacture phases of making a compact disc product.




Page 8                                   GAO/NSlAD!IO-101   hfbrmation   Technology
Appendix I

Introduction


               The Defense Cataloging and Standardization Act of 1952 requires the
Background     Department of Defense (DOD) to operate a single catalog system for sup-
               ply data. The system, known as the Federal Catalog System, falls under
               the direction of the Office of the Assistant Secretary of Defense for Pro-
               duction and Logistics. IJnder the assistant secretary, the Defense Logis-
               tics Agency (DLA) is responsible for the administration of cataloging
               policies and overall control of cataloging for the federal government.
               The Defense Logistics Services Center, a DLA field activity, is responsible
               for preparing cataloging publications and for processing data for inclu-
               sion in the catalog system.

               The Federal Logistics Data on Compact Disc program was developed by
               DLA and the services to put DOD's catalog of logistics information on com-
               pact disc. The data are used by about 49,000 customers to provide infor-
               mation on equipment, parts, and supplies used by DoD and other
               government agencies for various purposes such as requisitioning and
               purchasing items. Logistics data included in the catalog for an individual
               item include the item name, a government-assigned national stock
               number, manufacturer names and part numbers, and such characteristic
               data as physical and performance information.

               Over the years, the Services Center has published such information in a
               variety of forms, including paper, microfilm, and microfiche. Some com-
               mercial vendors have also published DOD'S catalog and supplied it to the
               government and other users through various media, including on-line
               computer access services. In November 1986, a new means of providing
               this data to users was marketed by a commercial vendor using Compact
               Disc Read Only Memory (CD-ROM) technology. Since that time, at least
               four other commercial vendors have marketed similar products.

               Prior to the introduction of the first commercial product, DOD initiated
               the Federal Logistics Data on Compact Disc program to replace its cur-
               rent publications on microfiche. DIA delegated the responsibility for
               managing the development of a prototype of the CD-ROM based catalog to
               the Services Center, and DL4 retained responsibility for procuring the
               production version of the CDROM product through the Government Print-
               ing Office, which is generally responsible for processing publication ser-
               vices for the government.

               The majority of information included on the prototype was taken from
               the Federal Catalog System. The balance of the data was provided by
               the services to tailor some of the Federal Catalog System data to their



               Page6                                   GAO/NSIAD90-101InformationTechnology
Contents


Letter
                        -
Appendix I
Introduction                Background
                            Technology Used to Implement the Program
                            Objectives, Scope, and Methodology
                        -
Appendix II                                                                                                 12
The Prototype               Questions                                                                       12
                            Events Leading to the Development of a Prototype                                12
Development Project         Approach Used to Develop the Prototype                                          13
                            Appropriateness of the Prototype Development Project                            14
                            Contractual Arrangements                                                        15
                            Internal Control Weaknesses Affected Management of                              17
                                 Prototype Effort
                        -
Appendix III                                                                                                21
Planned Competitive         Questions                                                                       21
                            DLA’s Acquisition Approach, Extent of Commercial                                21
Acquisition                     Involvement, and Alternatives Considered
                            Acquisition Status                                                              22
                            Sensitive Data and Impact on Acquisition Strategy                               23

Appendix IV                                                                                                 24
Major Contributors to
This Report
Table                       Table II. 1: Information on Prototype Data Files,                                14
                                Capabilities, and Test Sites

Figures                     Figure I. 1: How a Compact Disc Product Is Used                                   7
                            Figure 1.2: How a Compact Disc Product Is Made                                    9
                            Figure 11.1:Contractual Arrangements Used to Support                             16
                                 the Prototype Development Project




                            Page 4                                  GAO/NSIALMO-101   Information   Technology
                  E-236879




                  with existing laws and regulations, and the Services Center did not fol-
                  low commonly accepted internal control procedures in managing these
                  arrangements. In addition, the Services Center did not adequately moni-
                  tor DOD organizations acting on its behalf to ensure that they properly
                  administered the contracting efforts. As a result, the Services Center
                  inappropriately expended about $145,000. The prototype project was
                  completed in January 1989 (see app. II).

                  With regard to Defense Logistics Agency plans to procure a production
                  version of the prototype disc system, the Agency has adopted a competi-
                  tive acquisition strategy. The Agency is acquiring a logistics data system
                  through the Government Printing Office, which issued a request for pro-
                  posals on November 3, 1989. Agency officials indicate the request pro-
                  vides for full and open competition and the maximum extent of
                  commercial involvement that is possible (see app. III).

                  According to Agency officials, the decision to include business or other-
                  wise sensitive data has had no impact on the acquisition strategy, but
                  was one of several reasons for ruling out the use of existing commercial
                  products. The Agency did not consider this a viable option because the
                  government would not be able to effectively control the quality and dis-
                  tribution of the sensitive information in multiple vendor products, and
                  use of multiple products would not meet its requirement for standardi-
                  zation (see app. III).

                  Our objectives, scope, and met,hodology are described in appendix I.


                  DODprovided official oral comments on the draft report. It generally
Agency Comments   concurred with our findings, stating most of the problems we had identi-
                  fied were caused by DOD'S desire to field a uniform, DOD-wide compact
                  disc capability as rapidly as possible. We have incorporated specific
                  comments where appropriate.


                   Unless you publicly announce its contents earlier, we plan no further
                   distribution of this report until 5 days from the date of this letter. At
                   that time, we will send copies to the Chairmen, House and Senate Com-
                   mittees on Appropriations and on Armed Services; the Chairman, Senate
                   Committee on Governmental Affairs; the Chairman, House Committee
                   on Government Operations; the Secretary of Defense; the Director,
                   Defense Logistics Agency; and the Director, Office of Management and
                   Budget. We will also make copies available to others upon request.


                   Page2                                  GAO/NSIAD-90.101Info~tionTechnolo~