oversight

Acquisition Reform: Obstacles to Implementing the Federal Acquisition Computer Network

Published by the Government Accountability Office on 1997-01-03.

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

                  United States General Accounting Office

GAO               Report to Congressional Committees




January 1997
                  ACQUISITION
                  REFORM
                  Obstacles to
                  Implementing the
                  Federal Acquisition
                  Computer Network




GAO/NSIAD-97-26
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-272646

             January 3, 1997

             Congressional Committees

             The Federal Acquisition Streamlining Act of 1994 (FASA), Public Law
             103-355, mandated the establishment of a Federal Acquisition Computer
             Network (FACNET) architecture to enable federal agencies and vendors to
             do business electronically in a standard way. FACNET is intended primarily
             for purchases valued above the micro-purchase threshold ($2,500) up to
             the simplified acquisition threshold (currently $100,000).1 Federal officials
             and others expected many benefits from FACNET, including expanded
             contracting opportunities for small businesses, increased competition and
             lower prices for goods and services, reduced contract processing times,
             simplified procurement processes, and improved federal productivity.

             As part of our ongoing work on FASA implementation, we reviewed the
             federal government’s progress in developing and implementing FACNET.
             Specifically, we ascertained (1) federal agencies’ use of FACNET,
             (2) problems and benefits of using FACNET, (3) concerns relating to FASA’s
             requirements for FACNET, and (4) management obstacles to effective
             governmentwide implementation of FACNET. For this report we obtained
             information from 18 federal agencies that in fiscal year 1995 accounted for
             about 90 percent of both the number and dollar value of federal
             procurement actions of $100,000 or less reported to the Federal
             Procurement Data System (the governmentwide procurement database).
             The Department of Defense (DOD) alone accounted for approximately
             80 percent of the number and value of these reported actions. (A list of the
             responding agencies is in app. I.)


             On October 26, 1993, a presidential memorandum established a
Background   governmentwide goal of streamlining acquisition through the use of
             electronic commerce (EC). EC, the electronic exchange of the information
             needed to do business, embraces many technologies, including electronic
             data interchange (EDI), electronic mail (E-mail), computer bulletin boards,
             and electronic funds transfer. EDI is the computer-to-computer exchange
             of routine business documents using standardized data formats. To meet
             the President’s October 1993 goal, a governmentwide program to develop
             and implement an EDI-based architecture for federal acquisition was
             initiated.



             1
              Both thresholds were established by FASA.



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                   Title IX of FASA, enacted on October 13, 1994, provided the statutory
                   framework for the governmentwide EC/EDI initiative.2 FASA mandated the
                   development and implementation of a governmentwide FACNET
                   architecture to expand small business access to the government
                   marketplace and simplify and speed the solicitation and award of
                   competitive procurements. FASA requires that FACNET provide
                   (1) widespread public notice of both contracting opportunities and
                   awards; (2) a means for vendors to electronically review, request
                   information on, and respond to solicitations and similar information; and
                   (3) recordkeeping on each procurement action. The act also requires that,
                   if practicable, FACNET provide other capabilities, such as issuing orders
                   under existing contracts and making payments.

                   FASA does not specify a particular governmentwide EC/EDI systems
                   architecture or design but does require FACNET to use commercial
                   hardware and software, provide universal user access, and employ
                   nationally and internationally recognized data formats. Throughout this
                   report, the term “FACNET infrastructure” refers to the communications and
                   computer systems that transmit EDI transactions to and from federal
                   agency procuring activities and vendors.

                   The Administrator for Federal Procurement Policy, who heads the Office
                   of Federal Procurement Policy (OFPP) in the Office of Management and
                   Budget, has responsibility for overall policy direction and leadership of the
                   FACNET program. The Electronic Commerce Acquisition Program
                   Management Office (ECA-PMO), co-chaired by the General Services
                   Administration (GSA) and DOD and reporting to the Administrator, has been
                   chartered to coordinate and oversee FACNET implementation throughout
                   the federal government. Several agencies have been tasked to lead specific
                   governmentwide FACNET projects. In particular, DOD has lead agency
                   responsibility for developing, operating, and supporting the FACNET
                   infrastructure and a new federal centralized contractor registration
                   database to be used with it.


                   Overall, the federal government has executed relatively few procurement
Results in Brief   actions through FACNET.3 Available data indicates that in 1995 less than 2
                   percent of about 2 million federal procurement actions valued at $2,501 to

                   2
                    Essentially, the FACNET program merged with the ongoing governmentwide initiative.
                   3
                    Throughout this report, the term “procurement actions” includes purchase orders and other new
                   contract awards as well as task orders (for services) and delivery orders (for products) under existing
                   contracts, as reported into the Federal Procurement Data System.



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$100,000—FACNET’s target dollar range—were accomplished through
FACNET. DOD executed the vast majority of all FACNET procurement actions
that federal agencies have reported.

Difficulties doing business through FACNET have overshadowed the
benefits of using it. For example, lost, late, and duplicate transactions and
network interruptions have frustrated government and industry users and
delayed procurements. Officials from at least 14 of the 18 agencies we
contacted rated the lack of (1) a sound FACNET infrastructure, (2) effective
engineering and operational management, and (3) a well-populated and
fully functional centralized contractor registration database as great or
very great obstacles to effective FACNET implementation.

Officials of many federal agencies said the current FACNET approach is out
of step with new, cost-effective technologies and buying practices, such as
the Internet and electronic ordering from online catalogs. Although FACNET
has, in some instances, resulted in lower prices and expanded access to
vendors, agency officials and vendors often said that FACNET is not
producing the benefits expected. Moreover, agencies’ analyses have
concluded that using FACNET to award contracts of $25,000 or less often
takes longer and requires more resources than traditional simplified
purchasing methods for such awards.

As mandated by FASA, FACNET implementation has focused primarily on
competitive contract awards, requiring agencies to exchange information
with multiple, often unknown vendors. Organizations with the most
success in using EDI technology for purchasing, however, typically use it to
transmit high-volume, routine, and repetitive transactions, such as delivery
orders under existing contracts and invoices, with a small group of known
suppliers. Federal officials have stated that FASA’s requirement to focus
FACNET’s implementation principally on competitive contract awards—a
government-unique application of EDI technology—may not have been a
good approach and has contributed significantly to FACNET’s problems.

In addition to this fundamental problem, agencies and vendors have
consistently cited leadership and management shortcomings as major
reasons for delays and unresolved problems in FACNET implementation.
The Administrator for Federal Procurement Policy, and other OFPP and
ECA-PMO officials have (1) acknowledged shortcomings in management of
the governmentwide FACNET program and (2) said that ad hoc funding and
staffing of the ECA-PMO has hampered effective program management
effort. Agency officials also expressed considerable uncertainty about



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                 what the governmentwide strategy for FACNET implementation is.
                 Currently, the federal government lacks a coherent strategy and
                 implementation approach for efficiently and effectively carrying out the
                 agencies’ requirements for the acquisition function using various EC
                 technologies and purchasing methods, where appropriate.


                 FASA requires, among other things, the head of each executive agency to
Limited Use of   provide for implementation of full FACNET capability “as soon as
FACNET           practicable” after FASA’s enactment.4 An agency can be certified as fully
                 FACNET capable when more than 75 percent of its FACNET-eligible contract
                 awards valued at $2,501 to $100,000 were made through FACNET during the
                 preceding fiscal year.5 However, FASA’s prescribed process for determining
                 what constitutes eligible contracts precludes such a determination until
                 October 12, 1997, at the earliest.6 Therefore, the information needed to
                 measure progress toward meeting these FASA criteria for FACNET success
                 will not be available before that date.

                 Although the information needed to measure progress toward FASA’s
                 criteria is not available, federal agencies have reported executing
                 relatively few procurement actions through FACNET. For example, federal
                 agencies reported 113,000 FACNET procurement actions for 1995. Available
                 information indicates that (1) only about 25 percent of these actions were
                 valued at $2,501 to $100,000 and (2) such actions may have represented
                 less than 2 percent of all 1995 federal procurement actions in that dollar
                 range. The remaining 75 percent of the 113,000 actions were almost all for
                 $2,500 or less, and available information indicates that such actions may
                 have represented less than 1 percent of all 1995 federal procurement
                 actions in that dollar range.7

                 4
                  About 1 year earlier, the President’s memorandum set several milestones for the governmentwide EC
                 initiative, which included implementing a full-scale EC/EDI system by July 1995 and completing—to
                 the maximum extent possible—its governmentwide implementation for appropriate federal purchases
                 by January 1997. FASA provides various exceptions from the use of FACNET in cases where
                 individuals in specified federal positions determine that such use is not practicable or cost-effective.
                 5
                   FASA also requires that governmentwide, before January 2000, at least 75 percent of FACNET-eligible
                 contracts in this same dollar range be awarded through FACNET during a preceding fiscal year.
                 6
                  In addition, data on the total number of contract awards within the $2,501 to $100,000 dollar range is
                 not collected governmentwide. DOD, however, does collect such information.
                 7
                   We based these statements on the best information available. This included a DOD-funded study by the
                 Logistics Management Institute, which estimated that 12 percent of DOD’s fiscal year 1994
                 procurement actions were for $2,501 to $100,000 and 85 percent were for $2,500 or less. Assuming
                 these estimates are reasonably accurate for governmentwide use, we applied them to the 18 million
                 procurement actions federal agencies reported to the Federal Procurement Data System for calendar
                 year 1995.



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According to OFPP, the number of FACNET awards can be expected to
remain relatively small unless FACNET proves to be a better, cheaper, faster
purchasing technique than traditional small purchase methods.

DOD  made the vast majority of the 113,000 FACNET procurement actions,
while civilian agencies made few. For example, DOD reported 97 percent of
the FACNET procurement actions reported by federal agencies for 1995.
(See table II.1 in app. II for data on 1995 and table II.2 for data covering
January through March 1996.) According to DOD, (1) it has inserted EC/EDI
enabling technology into 300 sites over the past 2 years, and (2) these sites
generate 80 percent of DOD’s procurement actions of $100,000 or less.

Several agencies reported that their EC implementation plans call for using
a number of different EC technologies. OFPP indicated that (1) each agency
was asked to develop its own implementation plan to integrate EC into its
internal processes and (2) since EC technologies are evolving, OFPP allowed
the agencies a high degree of discretion in how they applied EC. According
to DOD, its approach from the outset has been to utilize any and all
technologies that were appropriate for a given business transaction. In
figure 1, we show that officials of the agencies we contacted cited most
frequently the Internet, electronic catalogs, and FACNET, in that order, as EC
tools or methods they expected to have great or very great importance to
their agencies through 1999. (For details on agencies’ responses regarding
this, see table III.1 in app. III.)




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Figure 1: Agency Views on Relative
Importance of Various Electronic
Procurement Methods
                                      Number of agencies
                                      12
                                                  10
                                      10
                                                                 8
                                       8                                      7


                                       6                                                    5


                                       4                                                                 3
                                                                                                                       2
                                       2


                                       0
                                              Internet       FACNET           Bulletin board
                                                     Catalog       Some alternative      Agency unique
                                       Electronic procurement methods




                                     Source: Our analysis of 17 agencies’ responses. One agency, the Department of Commerce, did
                                     not provide its views on this topic.



                                     Since the inception of the FACNET program, government agencies and
Problems Using                       vendors have identified operational problems with the infrastructure and
FACNET                               the centralized database for contractor registration. Our review indicated
                                     that, as of September 1996, these problems had still not been resolved.
                                     Also, agency officials expressed preferences for EC purchasing methods
                                     other than FACNET, and many vendors found few incentives to participate
                                     in FACNET. Agencies and vendors reported that FACNET has resulted in lower
                                     prices and expanded markets in some cases but, more generally stated
                                     that FACNET was not providing the benefits expected.




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Background on FACNET    DOD  began developing the current FACNET infrastructure in response to DOD
                        and governmentwide EC initiatives preceding FASA’s enactment. DOD has
                        operated and continued to develop the infrastructure with the stated
                        purpose of enabling all federal agencies to implement both FACNET
                        requirements and the goals of the governmentwide EC/EDI program. The
                        following simplified description illustrates a business transaction moving
                        through the current FACNET infrastructure. A buyer at a procuring activity
                        electronically prepares and transmits Requests for Quotations or other
                        solicitation data from the activity’s automated procurement system
                        through the infrastructure, which performs several functions. These
                        include translating the data into standardized EDI formats and relaying the
                        information to privately owned, participating Value-Added Networks
                        (VAN).8 VANs distribute the information—in a mutually agreed-upon
                        format—to vendors that subscribe to their services. Vendors, in turn,
                        transmit their quotations through the network back to the agencies. After
                        the buyer selects the winning vendor, a purchase order is transmitted to
                        the vendor. Then, a broadcast notice announcing the winning vendor is
                        transmitted to the VANs for distribution to vendors.

                        A key goal of FACNET is to present a “single face to industry.”9 Among the
                        critical elements of the single face concept are that vendors, by registering
                        once in a governmentwide Central Contractor Registration (CCR) database,
                        have access to and can respond to government solicitations and similar
                        information through any single point of entry, using a single set of
                        standards. Ideally, this would give a vendor easy access to information on
                        numerous proposed contracts and awards including, for example, federal
                        contracting opportunities up to $100,000 that previously would have been
                        either listed in the Commerce Business Daily or manually posted at the
                        procuring activity. And, the vendor could respond to government buyers in
                        any agency using a single electronic system, as opposed to dealing with
                        numerous different agency or procuring activity-unique systems.


Operational Problems    There was a broad consensus that FACNET has had operational problems.
Reported Throughout     For example, government and industry FACNET users reported hundreds of
FACNET Infrastructure   malfunctions in sending and receiving FACNET transactions. Lost, late, and
                        duplicate transactions and network interruptions frustrated agencies,


                        8
                         Participating VANs must be tested and certified by DOD.
                        9
                         According to DOD, this means that all government agencies would conduct EDI using American
                        National Standards Institute X12 standards, common implementation conventions, a common
                        telecommunications infrastructure, and a common set of business practices. (See Introduction to
                        Department of Defense Electronic Commerce, a Handbook for Business.)



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VANs, and vendors and delayed procurements. ECA-PMO officials and users
stated that these problems were significant.

Most of the 99 contracting offices responding to a recent Army-wide
survey of the effectiveness of FACNET reported problems with the FACNET
infrastructure.10 Feedback from Air Force and Navy operational
contracting activities reported to the Under Secretary of Defense
(Acquisition & Technology) in July and August 1996 also stated that FACNET
often had not worked well. Similarly, at least 14 of the 18 agencies we
contacted cited the lack of a sound FACNET infrastructure and the lack of
effective engineering and operational management as great or very great
obstacles to efficient and effective implementation of FACNET. (See
table III.2, in app. III, for details.)

Buyers and vendors have been reluctant to do business through FACNET, in
part, because of operational problems. For example, in April 1996, a senior
contracting official at the Army’s Training and Doctrine Command stated
that FACNET did not function well enough to support the Command’s
requirements in a meaningful way. He noted that outgoing FACNET
solicitations had been lost or received by vendors as late as 2 weeks after
transmittal and responses vendors had sent out soon enough to be on time
were received at the Command several days after the closing date. He
added that (1) vendors were frustrated about spending time and money to
become FACNET-capable and then discovering that their quotes did not
make it through the system and (2) vendors often faxed their quotes to
Training and Doctrine Command buyers, in addition to transmitting them
through FACNET, to ensure receipt. Another Army contracting activity
reported that its buyers routinely mail out copies of FACNET award notices
because vendors complained that they were not receiving them through
FACNET.


In July 1996, an official with the San Antonio Electronic Commerce
Resource Center who works with small businesses and government offices
in introducing EC into their business practices told us that FACNET has had
its share of growing pains. In particular, he noted that lost and duplicate
transactions and a general instability of FACNET have caused many vendors
to question the wisdom of participating on FACNET.

For vendors, problems in transmitting and managing transactions through
FACNET can result in lost business opportunities and additional


10
  Information Paper on Survey of U.S. Army Contracting Offices conducting Electronic Data
Interchange through the Federal Acquisition Computer Network, May 1996.



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                        transmission fees paid to VANs. For the government, such problems cause
                        delays in getting needed supplies and services, reduce productivity, and
                        lead to bid protests. In June 1996, for example, our office considered a
                        protest concerning a FACNET acquisition in which three quotes submitted
                        through FACNET were lost.11

                        DOD  has recently made major design changes to enhance the FACNET
                        infrastructure. Officials responsible for the redesign stated that the new
                        infrastructure should reduce the operational problems that have been
                        identified, including an inability to track transactions through FACNET, and
                        lost and late transactions. The DOD Inspector General recently reported
                        that the proposed redesign, referred to as the Electronic Commerce
                        Processing Nodes, should reduce the recurring problems related to lost
                        and late transactions, the inability to track transactions, and the lack of
                        acknowledgment for transactions.12 In a separate report, the DOD Inspector
                        General recommended that DOD verify that implementation of the
                        Electronic Commerce Processing Nodes corrects technical problems
                        associated with FACNET.13


CCR Database Is Not     Effective implementation of the CCR database is fundamental to the current
Operating as Intended   FACNET strategy and to achieving a single face to industry. The goal is to
                        provide (1) contractors with a one-time registration process for doing
                        business with all government procuring activities and (2) government
                        buyers with one central database to query for contractor information.
                        Vendor registration in, and agency use of, the CCR database is mandated in
                        the governmentwide Federal Acquisition Regulation (FAR) implementing
                        FASA’s requirements for FACNET. The database, however, has been
                        experiencing significant problems, is far behind schedule, and is still not
                        performing its intended role of operating as the single federal contractor
                        registration system.

                        DOD reported in October 1996 that only about 4,000 of an estimated 300,000
                        government contractors had validated registrations in the database.
                        Currently, agencies must award contracts to unregistered vendors because
                        the CCR database does not have enough registered vendors to supply the


                        11
                         S.D.M. Supply, Inc., B-271492, June 26, 1996, 96-1 CPD para. 288, aff”d., Department of the
                        Army—Recon., B-271492.2, Nov. 27, 1996, 96-2 CPD para.
                        12
                         Defense Information Systems Agency Management of Trouble Tickets For Electronic
                        Commerce/Electronic Data Interchange (DOD Inspector General Report No. 97-010, Oct. 28, 1996).
                        13
                         Vendor Participation in the Federal Acquisition Computer Network (DOD Inspector General Report
                        No. 97-002, Oct. 4, 1996).



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                          full range of products and services needed. Sixteen of the 17 agencies from
                          which we obtained information on this matter cited the lack of a
                          well-populated and fully operational CCR database as a great or very great
                          obstacle to efficient and effective implementation of FACNET. (See
                          table III.2, in app. III, for details.)


Agencies Are Opting for   According to agency officials, one of the more significant factors limiting
Other EC Methods          the usefulness of FACNET is that other electronic purchasing methods are
                          available that are simpler and faster. For example, purchase cards
                          (government-issued commercial credit cards);14 the Internet; online
                          catalogs, including the GSA’s automated supply schedule contracts; and
                          other commercial alternatives have been introduced into government
                          contracting and their use is growing rapidly. Use of the purchase cards for
                          contract payment, combined with electronic ordering from online
                          contracts, and/or new, more flexible procedures for the use of federal
                          supply schedule contracts provides agencies with readily available
                          alternatives to meeting their procurement needs that were not available
                          just a few years ago, when FASA was being written. Moreover, technology
                          developments are expected to continue to offer opportunities to improve
                          federal purchasing methods.

                          These developments have led some agencies and many federal officials
                          involved with FACNET implementation to question whether—especially for
                          small competitive acquisitions, such as those under $25,000—the use of
                          the current FACNET infrastructure makes good business sense. National
                          Aeronautics and Space Administration (NASA) officials said that NASA
                          intended to concentrate its EC efforts on Internet-based acquisition
                          services and not FACNET. Some Air Force and Army contracting activities
                          have also suggested using the Internet instead of FACNET. Officials of 15
                          federal agencies are working together to pursue Internet-based initiatives.15


                          The DOD Inspector General reported that DOD officials responsible for
                          FACNET had (1) acknowledged that the evolution of new technologies was



                          14
                           In 1995, purchase cards were used at most federal agencies for over 4 million purchases—worth
                          more than $1.6 billion—and in 1996 purchase card sales were $2.9 billion. Most of the 1995 purchases,
                          however, were valued at less than the FACNET target dollar range, and this emphasis is expected to
                          continue. See our report, Acquisition Reform: Purchase Card Use Cuts Procurement Costs, Improves
                          Efficiency (GAO/NSIAD-96-138, Aug. 6, 1996).
                          15
                           The Interagency Acquisition Internet Council was established May 22, 1996, to seek and promote
                          ways to optimize use of the Internet in streamlining the federal acquisition process and increasing
                          communications of federal acquisition-related information.



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                                   creating alternatives to DOD’s original concept of FACNET as the single
                                   mechanism for EC/EDI procurements and (2) indicated that alternatives
                                   were being analyzed that would still maintain the single face to industry
                                   goal.16 In a July 1996 memorandum, the Assistant Secretary of the Air
                                   Force stated that while the DOD procurement community has recognized
                                   that the current network for FACNET needs changing, there is no current
                                   solution. In November 1996, DOD expressed the belief that in conducting
                                   competitive procurements, the requirements to be FACNET-compliant,
                                   particularly the single face to industry goal, are critical. For other than
                                   competitive transactions (which includes noncompetitive awards and
                                   orders under existing contracts), DOD added, it may not be necessary to
                                   meet FACNET requirements.

                                   ECA-PMO officials observed that with agencies now viewing direct buying
                                   (through ordering from online catalogs or other existing contracts) as
                                   more efficient, the current FACNET infrastructure is becoming “less
                                   relevant.” OFPP and the ECA-PMO officials said they are moving away from a
                                   one-size-fits-all approach to FACNET implementation in favor of allowing
                                   agencies the flexibility to employ the best technology for a particular
                                   acquisition. As part of this strategy, they are encouraging agencies to use
                                   all types of EC, including FACNET, the Internet, purchase cards, and online
                                   catalogs—whichever tool makes the most business sense.


Vendors Find Few                   Many small businesses have stated that the lack of clear and consistent
Incentives for Participation       FACNET policy, procurement procedures, and specific business information
                                   are major disincentives to FACNET participation for them. For example,
                                   some FACNET vendors said that inconsistent and, in some cases, directly
                                   opposite practices were used at different procuring activities. They
                                   pointed out that

                               •   some buyers accept fax queries for more information and send faxes to
                                   clarify FACNET solicitations, while other procuring activities no longer
                                   permit use of faxes and will ignore any incoming fax messages;17
                               •   there seems to be no consistent policy covering procurements exempted
                                   from use of FACNET;18 and

                                   16
                                    DOD Implementation of Electronic Commerce in Contracting for Small Purchases (DOD Inspector
                                   General Report No. 96-129, May 24, 1996).
                                   17
                                     The proposed FAR Part 13 restructuring rule (published in the Federal Register on Sept. 13,
                                   1996) stated that if an acquisition was conducted through FACNET, agencies need not respond to
                                   telephone or fax inquiries from vendors unless they are unable to receive inquiries through FACNET.
                                   18
                                      DOD’s policy memorandum, dated June 23, 1995, to its FACNET-capable activities required that all
                                   simplified procurements be issued via FACNET, unless exempted.



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•   the number of days a solicitation remains open is highly variable.

    Vendor commitment to FACNET is influenced by the lack of consistency in
    procurement procedures and policies like these.19

    Some vendors complain that they are unable to get the information they
    need on agencies’ and procuring activities’ current and future FACNET
    business opportunities. Vendors point out that they need such information
    to determine whether FACNET will generate sufficient revenues to justify
    the investments needed to participate in FACNET. Last year we testified
    that, depending on the volume of transactions and types of services,
    businesses could incur costs ranging from about $70 to several thousand
    dollars monthly for VAN services alone. The use of VANs is a key component
    of the current FACNET infrastructure.20

    Agency officials also stated that FACNET can be expensive for vendors to
    implement. According to one agency official, vendors are unwilling to
    make the investment in time and money to participate, because of the
    problems the government is experiencing with FACNET. More than
    40 percent of the contracting activities in the Army’s 1996 FACNET survey
    said that there were insufficient numbers of vendors participating in
    FACNET. EC program managers at other agencies told us that FACNET
    solicitations often had to be canceled because of little or no vendor
    response. According to officials of several agencies, few vendors,
    particularly small businesses, are EDI-capable and the current FACNET
    implementation approach offers few incentives for these businesses to
    participate.

    The Administrator for Federal Procurement Policy acknowledged that VAN
    costs create major problems for small businesses. He added that a small
    business has to sell a lot to the government to make the investment
    worthwhile, which could have the effect of concentrating work among a
    class of EDI-capable vendors that specialize in doing government business
    over FACNET.



    19
      In an audit on vendor participation in FACNET, the DOD Office of the Inspector General surveyed
    100 vendors, of which 85 identified one or more of the following major impediments to using FACNET
    to conduct small purchase transactions with DOD. The vendors said they were not participating
    because (1) they were not aware of FACNET, (2) FACNET was not an appropriate procurement
    method for some small- and medium-sized vendors, and/or (3) FACNET was unreliable. (See DOD
    Inspector General Report No. 97-002, pages i, 5, and 7.)
    20
     Implementation of the Federal Acquisition Streamlining Act of 1994 (GAO/T-NSIAD/AIMD-95-190,
    July 20, 1995).



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                            DOD  acknowledged that there is a cost to small businesses associated with
                            VANs’ processing FACNET transactions but stated that the cost of doing
                            business manually often meant the small business had to use an agent to
                            review physical bulletin boards—at potentially 1,400 separate DOD
                            sites—the only places where contracting opportunities under $25,000 were
                            posted.


Expected Benefits Not Yet   In 1993, the National Performance Review stated that exchanging
Being Realized              acquisition information with vendors electronically could result in
                            governmentwide savings of up to $500 million per year, due to increased
                            competition and reduced federal paperwork. On the basis of agencies’
                            reported experiences to date, FACNET has not resulted in the significant
                            benefits that were expected from using EC—savings in time and money
                            and increased federal productivity.

                            For some FACNET procurements, agencies are reporting direct benefits,
                            such as reduced contracting leadtimes, improved price competition, and
                            an increased vendor base. More generally, however, government buyers
                            have found that using FACNET to award contracts of $25,000 or less takes
                            longer and requires more resources than traditional methods. They
                            attribute this, in part, to the frequent need to communicate by telephone
                            and fax with vendors to verify the receipt of a quote, answer questions, or
                            investigate a vendor’s capabilities and those of its products. Further, they
                            noted that their efforts have been hampered by a lack of guidance on how
                            to evaluate vendors’ responses, particularly when a substantial number of
                            quotes are received and how to determine the timeliness of vendors’
                            quotes.

                            The results of a U.S. Army Missile Command comparison of 179 FACNET
                            actions and the same number and types of non-FACNET (and non-EDI)
                            actions were that the use of FACNET prolonged the procurement process for
                            purchases of $2,501 to $25,000 from an average of 3 days to more than 7
                            days and required extra resources and effort. The Command official
                            responsible for the comparison concluded that for this price range, the
                            cost in time and effort far overshadows any small savings FACNET
                            produces. The Department of the Interior performed a similar test at five
                            buying locations and got comparable results.

                            The Administrator for Federal Procurement Policy told us that the
                            problems reported by frontline procurement staff trying to implement
                            FACNET prompted his office to recommend several policy changes last year.




                            Page 13                                      GAO/NSIAD-97-26 Acquisition Reform
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The FAR Council adopted many of these recommended changes, as part of
the proposed FAR Part 13 restructuring rule.21 The proposed rule would
give agencies greater flexibility in using FACNET, as OFPP recommended,
including the authority to describe requirements using multiple brand
names for purchases under $25,000 and conduct more expedited
evaluation of vendors’ quotes or offers. Additionally, the proposed rule
states that agencies need not respond to inquiries (1) by telephone or fax,
unless they are unable to receive inquiries through FACNET or (2) through
any medium (including FACNET) if doing so would interfere with their
ability to conduct the procurement in an efficient manner. The
Administrator said these changes were intended to address procurement
offices’ complaints that FACNET had increased both the resources needed
to evaluate quotes and procurement leadtimes, compared with traditional
solicitation methods. He said the changes were also intended to enhance
FACNET’s viability and increase agencies’ use of it.


Key agency officials responsible for FACNET implementation at the 18
agencies we contacted cited indirect benefits—such as lessons learned
that will likely benefit the government in the future—as the most
significant benefits being realized from FACNET. (See table III.3 in app. III
for details.) The benefits of FACNET being realized to a great or very great
extent, as reported by federal agencies, are shown in figure 2. These
results did not differ substantially for DOD and its components, compared
with the civilian agencies—which use FACNET much less than DOD.




21
  The proposed rule was published in the Federal Register on September 13, 1996.



Page 14                                                    GAO/NSIAD-97-26 Acquisition Reform
                                      B-272646




Figure 2: Reported Benefits of
FACNET Realized by Federal Agencies
                                           Number of agencies
                                           12


                                           10                             9
                                                                                             8
                                            8                                                                      7                    7


                                            6


                                            4                                                                                                                  3
                                                                                                                                                                                2                         2
                                            2


                                            0
                                                                              Promoted EDI




                                                                                                                       Policy lessons




                                                                                                                                                 Saved money
                                                                                                 Enhanced skills




                                                                                                                                                                   Saved time



                                                                                                                                                                                    Higher productivity
                                                      Technical lessons




                                                Benefits




                                      Source: Our analysis of 17 agencies’ responses. One agency, the Department of Commerce, did
                                      not provide its views on this topic.



                                      Federal officials responsible for FACNET stated that the basic concept
Concerns About                        underlying FACNET may not be sound. As mandated by FASA, FACNET focuses
FASA’s Requirements                   primarily on competitive solicitations and new contract awards,22
for FACNET                            requiring a federal agency to provide widespread public notice and
                                      exchange information with multiple vendors—not just one. As previously
                                      noted, FASA requires that FACNET provide (1) widespread public notice of
                                      contracting opportunities and (2) a means for private sector users to

                                      22
                                       FASA’s 75-percent criteria for a successful FACNET program, previously discussed, excludes orders
                                      under existing contracts—because such orders are not contract awards.



                                      Page 15                                                                                               GAO/NSIAD-97-26 Acquisition Reform
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electronically access and review executive agency solicitations and
respond to them.

Federal officials said the concept, using EDI technology to focus primarily
on relatively low dollar value competitive contract awards to small
businesses, may not be the best solution for the procurements targeted.
These officials noted that the concept was developed and pilot tested by
the executive branch and formed the basis for the FASA approach. The
concept emphasizes the use of EDI, a technology that has been used
primarily to support a high volume of routine “one-to-one,”23
computer-to-computer business transactions between organizations that
have established a close working relationship. Examples of such
transactions include delivery orders under existing contracts and invoices
exchanged between a company and its regular suppliers. Commercial
companies and some federal agencies have found that EDI technology can
be very effective when used in this way.

Three federal agencies that are using EDI successfully for one-to-one
transactions—the Defense Logistics Agency, GSA, and the Department of
Veterans Affairs—reported transmitting a total of about 840,000 delivery
orders and 517,000 invoices in 1995.24 The Administrator for Federal
Procurement Policy stated that a lot of progress has been made in federal
agency use of EDI technology for acquisition—but outside of FACNET—as
shown by these three agencies’ efforts on one-to-one transactions.
According to DOD, (1) the organizations currently processing these
one-to-one transactions are primarily utilizing proprietary solutions, or
noncompliant standards, and do not present a single face to industry at
this time and (2) maintaining and sustaining such actions are outside DOD’s
Information Infrastructure—“a FACNET compliant system.”

Because the technical and business requirements for such one-to-many
transactions differ significantly from one-to-one transactions, agencies
using FACNET have not been able to benefit fully from the lessons learned
and from long-term familiarity with electronic delivery orders and invoices
on the part of commercial companies and the Defense Logistics Agency,
GSA, and the Department of Veteran Affairs. Moreover, the use of FACNET
for one-to-many transactions is essentially a government-unique business

23
 In a one-to-one transaction, information is exchanged between only one company (or organization)
and another.
24
  The three agencies reported transmitting through their own EDI (non-FACNET) systems the
following numbers of delivery orders and invoices, respectively, in 1995: the Defense Logistics Agency
(325,586 and 93,735), GSA (157,351 and 37,999), and the Department of Veterans Affairs (357,443 and
385,016).



Page 16                                                     GAO/NSIAD-97-26 Acquisition Reform
                 B-272646




                 application of EDI, involving different business and technical
                 considerations than one-to-one delivery orders and invoices. Several OFPP,
                 ECA-PMO, GSA, and other agency officials said that focusing FACNET’s
                 implementation on competitive procurements has contributed
                 significantly to FACNET’s problems and the skepticism that surrounds the
                 existing infrastructure. The Administrator for Federal Procurement Policy
                 and other agency officials also told us that FASA’s requirement to focus
                 FACNET principally on awarding relatively low dollar value contracts
                 competitively may not have been a good idea.


                 Implementation of FACNET on a governmentwide basis is a substantial
Leadership and   undertaking that requires effective leadership and management to be
Management       successful. Since FACNET’s inception, significant technical, business, and
Problems         policy issues have confronted the FACNET program, many of which have
                 not been resolved, delaying FACNET implementation. Agencies and vendors
                 have consistently cited the lack of clear leadership, direction, and
                 adequate program management governmentwide as major reasons for
                 delays in problem resolution and implementation of FACNET.

                 FASA requires the Administrator for Federal Procurement Policy to
                 (1) establish a program to develop and implement FACNET; (2) assign a
                 program manager for FACNET; and (3) provide for overall direction of
                 policy and leadership in, among other things, the development,
                 coordination, and completion of FACNET implementation by executive
                 agencies. DOD is the lead agency responsible for implementing the FACNET
                 architecture and the CCR database, including providing policies,
                 procedures, standards of operation, and day-to-day network management.
                 The ECA-PMO, co-chaired by DOD and GSA, was tasked to develop,
                 coordinate, and integrate the programs and tasks needed to implement
                 FACNET and the presidential memorandum.


                 A governmentwide strategy for FACNET implementation has not been
                 clearly and convincingly communicated. Officials responsible for FACNET
                 implementation in their agencies stated that the governmentwide program
                 has been fragmented and uncoordinated. Neither OFPP nor the ECA-PMO
                 operates as a focal point of central guidance and governmentwide
                 accountability for FACNET. In effect, each agency is left to pursue its own
                 FACNET strategy.


                 In addition, OFPP and the ECA-PMO have not systematically integrated and
                 managed the total framework of projects and functions necessary to



                 Page 17                                     GAO/NSIAD-97-26 Acquisition Reform
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develop, implement, and use FACNET and other EC technologies in a manner
that reflects the single face goal. As a consequence, the development and
use of key components of FACNET, including the architecture, the CCR
database, operational procedures, business information to attract vendors,
and policy guidance on the use of FACNET for agencies and the private
sector have not been clearly linked. Another consequence is that
governmentwide priorities for FACNET have not been clearly established,
communicated, and linked.

Since the early stages of implementation, agencies have consistently cited
the lack of clear leadership and governmentwide program management as
major sources of problems and delays in the program. The results of a
February 1995 EC roundtable (in which over 20 federal agencies were
represented) showed that the most significant concern of the participants
was leadership and support.

We found that little progress had been made in resolving concerns about
leadership and program management of FACNET. Of the 18 agencies we
contacted, 12 cited the lack of effective policy leadership outside their
agencies; 13 cited the lack of effective governmentwide program
management; and 14 cited the lack of effective FACNET engineering and
operational management as great or very great obstacles to efficient and
effective implementation of FACNET. (See table III.2, in app. III, for details.)

The key organizations responsible for FACNET—OFPP, DOD, and the
ECA-PMO—have not developed and put into place an effective
governmentwide management approach that includes (1) a clearly defined
program structure; (2) multiyear planning that clearly establishes
governmentwide implementation plans, anticipated results, and resource
requirements and priorities; (3) systematic review and approval of key
FACNET projects; and (4) feedback and evaluation that identifies the
progress made and corrective actions needed. Information was also
unavailable on the total estimated costs of FACNET implementation—or its
major components (such as the infrastructure or CCR database)—or the
governmentwide EC program.

The Administrator has acknowledged that there have been shortcomings
in management of the governmentwide FACNET program. Officials in OFPP
and the ECA-PMO told us they were aware of the agencies’ concerns about
the leadership and overall management of FACNET implementation. They
acknowledge that the kind of program management and reporting
described above has not been developed and is needed. However, they



Page 18                                        GAO/NSIAD-97-26 Acquisition Reform
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observed that ad hoc funding and staffing of the ECA-PMO from executive
agencies has hampered effective program management efforts.

The Administrator told us he had concluded by the summer of 1995, on the
basis of discussions with frontline contracting officials, that there were
extensive and persistent problems with FACNET implementation. He said
that over time he became convinced that (1) FACNET’s basic concept
(discussed in the previous section) was not sound and needed to be
revisited and (2) improved program management would not remedy this
fundamental problem. He added that there was not, and still is not, a
consensus among agencies’ senior procurement executives that these
problems were so fundamental that a major redirection of FACNET was
needed.

The shortcomings in governmentwide management of the FACNET program
have left important issues unresolved. For example, no convincing
business case has been made for governmentwide reliance on the current
FACNET infrastructure. Similarly, the lack of resolution of questions
concerning the CCR database has impeded its implementation. DOD officials
responsible for the database told us that even if better processes were put
in place for gathering vendor information, benefits expected from sharing
this information across government procuring activities would still be
contingent on policies and procedures being established concerning
access to and ownership of the data gathered. OFPP, ECA-PMO, and DOD
officials responsible for FACNET and the CCR database told us that the
following obstacles to governmentwide EC must be resolved:
(1) unanswered questions on who should have access to the CCR data and
how such data should be used by both the government and industry,
(2) the absence of policy and procedures for implementing such a
governmentwide database, and (3) database security problems.

DOD  officials responsible for the FACNET infrastructure, contracting
officials, VANs, and vendors stated that many operational problems stem
from the lack of clear requirements for the acquisition function and
operational procedures that are needed to direct the development and use
of the FACNET infrastructure and manage FACNET data. For instance,
requirements for archiving data, accessing data, recording critical
acquisition information, and auditing FACNET transactions have not been
established, and both buyers and vendors have frequently cited the need
for an electronic date/time stamp, as well as clear requirements and
procedures to record receipt of vendors’ quotes by the government.




Page 19                                     GAO/NSIAD-97-26 Acquisition Reform
                  B-272646




                  With respect to VANs, FACNET implementation has been hindered by
                  uncertainties regarding the government’s certification process, lack of
                  clear data management policies and procedures, and unresolved questions
                  about VANs’ financial and technical responsibilities. VAN representatives
                  and DOD officials responsible for VAN certification and oversight told us
                  that VANs have been operating without a clear understanding of the
                  objectives and requirements of the system. DOD is taking actions to address
                  some of these issues. Specifically, DOD recently issued a revised VAN
                  Licensing Agreement; and some testing and procedural changes reflected
                  in this revised agreement may improve the VAN certification process.

                  In addition, GSA and OFPP officials stated that the lessons learned in
                  creating a governmentwide EC program, new technology developments,
                  and broader policies affecting EC, such as the requirement to make all
                  payments to vendors electronically by 1999, have made it necessary to
                  take a fresh look at the government’s approach to EC in contracting and
                  how best to implement and manage it.25 OFPP officials said the government
                  intends to make more than 95 percent of its purchases under $100,000
                  through EC by the year 2000 in coordination with making electronic
                  payments to vendors.


                  In the short time since passage of FASA, alternative electronic purchasing
Conclusion        methods have become readily available to the government and its vendors.
                  This factor, concerns about FASA’s requirements, and the problems
                  associated with the existing FACNET implementation raise important
                  questions concerning whether and to what extent use of the current
                  FACNET infrastructure makes good business sense.


                  A related issue is how to integrate FACNET and other EC technologies and
                  purchasing methods into a coherent EC strategy and implementation
                  approach for effectively carrying out agencies’ acquisition functions and
                  achieving a single face to industry. Clear functional requirements, a
                  coherent strategy, effective governmentwide leadership and program
                  management, and accountability are lacking.


                  We recommend that the Director, Office of Management and Budget,
Recommendations   ensure that the Administrator for Federal Procurement Policy, in
                  consultation with the Secretary of Defense, the Administrator for General

                  25
                    The Debt Collection Improvement Act of 1996, section 31001 of Public Law 104-134, generally
                  requires all federal payments to be made electronically by 1999.



                  Page 20                                                    GAO/NSIAD-97-26 Acquisition Reform
                  B-272646




                  Services, the NASA Administrator, and the heads of other major federal
                  procuring agencies, develops a coherent and integrated federal
                  strategy—and implementation approach—for using, where appropriate,
                  various EC technologies and purchasing methods, including FACNET, for
                  effectively and efficiently carrying out the agencies’ requirements for the
                  acquisition function. The strategy and approach should incorporate
                  consideration of the need to achieve the single-face-to-industry goal.

                  We also recommend, if executive branch officials conclude that statutory
                  requirements for FACNET—such as focusing it on providing widespread
                  public notice of contracting opportunities and exchanging information
                  with multiple vendors—are impediments to the implementation of the
                  governmentwide EC strategy, that the Director of the Office of
                  Management and Budget seek legislative relief.


                  In commenting on the draft of this report, NASA, GSA, OFPP and DOD
Agency Comments   generally agreed with our findings and recommendations, but DOD
                  indicated that—since the completion of our audit work in
                  September 1996—it was no longer experiencing operational problems with
                  FACNET and the CCR system.


                  NASA  stated that it agreed that a mandated FACNET approach, based solely
                  on EDI, does not make the best business sense for federal EC. NASA stated
                  that it was encouraged by our recommendation that NASA join with other
                  agencies in developing a coherent strategy and implementation approach
                  that takes advantage of available EC technologies.

                  GSA stated that our findings are correct in targeting leadership
                  improvements. GSA stated that there have been leadership challenges in the
                  implementation of FACNET as well as technical and procedural problems
                  with the use of EDI for public requests for quotation. GSA specifically noted
                  that (1) civilian agencies, in many cases, have not provided adequate
                  resources, training, and vendor outreach required to successfully
                  implement FACNET or EC in general and (2) the ECA-PMO has been hindered
                  by a lack of funding and staffing.

                  OFPP stated that our report was very helpful in focusing its
                  governmentwide EC efforts. To help focus on solutions, OFPP stated that a
                  committee of the President’s Management Council has been established to
                  assist agency heads to manage the transition from paper to electronics,
                  focus resources, increase management efficiency, accelerate



                  Page 21                                      GAO/NSIAD-97-26 Acquisition Reform
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implementation, and connect resources to results. OFPP said it is
continuing to pursue the development of FACNET for use, where
appropriate, to streamline acquisition processes. OFPP said it is also
concerned that FACNET and all procurement policies offer real
improvements in serving the user and meeting the important missions
entrusted to government in a cost-effective way.

Both GSA and OFPP stated that they are working together and with other
agencies, which includes participation by the President’s Management
Council, to address the leadership and policy direction concerns raised
and to develop a new EC management framework. OFPP also stated that it
has taken steps to develop and implement that framework to better
integrate EC throughout government. In addition, GSA said this new
management structure will be put into place over the next several months,
will bring a better focus and problem resolution to the program, will be
cross-functional, and will be able to better review EC programs and
provide more long-range planning.

DOD  described recent enhancements it has made to FACNET’s infrastructure
and the CCR system and stated that it was no longer experiencing
operational problems. These enhancements included implementing (1) the
Electronic Commerce Processing Nodes on November 1, 1996, to improve
the FACNET infrastructure’s throughput and accuracy and (2) a World Wide
Web site and dial-up modem capability on October 1, 1996, which allows
vendors to register for free in the CCR database. DOD added that it is in the
process of developing a strategic plan to increase the CCR population in
1997.

In addition, DOD described other enhancements. For example, it stated that
it has recently completed an EC Strategic Plan that encompasses all
functional areas within the Department (procurement, finance, logistics,
transportation, personnel, medical, etc.) and includes all forms of EC (EDI,
fax, bar coding, etc.). According to DOD, this approach will provide a single
face to industry and allow the maximum exchange of data between
functional areas. DOD also said it is finalizing an EC directive that
establishes roles and responsibilities throughout the Department
pertaining to the implementation of EC in all functional areas.

DOD  stated that it will continue (1) to execute its FACNET implementation
plan and (2) increase the volume of transactions through the
infrastructure over the next three fiscal years. Finally, DOD stated that it is
ready to work with the OFPP, GSA, and NASA Administrators and the heads of



Page 22                                       GAO/NSIAD-97-26 Acquisition Reform
              B-272646




              other major federal procuring agencies to assist them in their development
              of independent strategies and the overall federal EC strategy for federal
              procurement.

              The comments from NASA, GSA, OFPP and DOD are reprinted in their entirety
              in appendixes IV through VII, respectively. We have made some changes in
              the report, where appropriate, based on these comments.


              To address our objectives, we asked EC program managers and
Scope and     comparable agency officials at DOD, its four major buying components, and
Methodology   18 federal civilian agencies to give us information and observations on
              their agencies’ efforts to implement FACNET. We sent a Data Collection
              Instrument (DCI) to 23 federal organizations; 18 responded to our questions
              from late March through May 1996. The DCI specifically asked for agency
              data and information related to (1) current FACNET operations, (2) current
              and potential FACNET procurement transactions, (3) benefits from using
              FACNET, (4) obstacles to governmentwide implementation of FACNET,
              (5) potential use of FACNET for simplified acquisitions, and (6) changes
              needed in the FACNET development and implementation strategies. When
              necessary we conducted follow-up interviews with respondents to clarify
              DCI responses and obtain additional information.


              In addition, to assess federal agencies’ use of FACNET, we asked the
              agencies to verify their FACNET transaction data (e.g., number of
              solicitations, responses received, purchase and delivery orders, and
              amount of awards) for the periods January through December 1995 and
              January through March 1996, which was the latest complete data reported
              by the ECA-PMO. We also obtained supplemental FACNET transaction data
              from the Departments of Commerce, Defense, Energy, Housing and Urban
              Development, Health and Human Services, and Labor; the Defense
              Logistics Agency; GSA; and NASA. We did not independently verify the
              agencies’ data submissions.

              To address the problems and benefits of FACNET, FASA’s requirements for
              FACNET, and obstacles to its implementation, we assessed FACNET guidance,
              implementation plans, and agencies’ reports indicating the status of FACNET
              implementation. We also compared the government’s overall FACNET
              strategy and implementation approach with (1) the EC/EDI implementation
              strategies and practices of other public and private organizations and
              (2) the goals, objectives, and milestones established for FACNET by FASA and
              established for the governmentwide EC program by the October 26, 1993,



              Page 23                                     GAO/NSIAD-97-26 Acquisition Reform
B-272646




presidential memorandum on streamlining procurement through EC. We
reviewed FACNET guidance, implementation plans, schedules, transaction
data, and status reports prepared by OFPP, the ECA-PMO, the DOD EC Office,
and the Defense Information Systems Agency. To further assess progress
and obstacles, we interviewed VAN representatives; FACNET vendors; and
senior OFPP, DOD, and GSA officials responsible for the governmentwide
FACNET program or key components, such as the architecture, the CCR
database, and FACNET policy and procedures.

Our audit work was performed between October 1995 and October 1996 in
accordance with generally accepted government auditing standards. We
performed our work primarily in the Washington, D.C., area at OFPP in the
Office of Management and Budget, the DOD EC Office in the Office of the
Deputy Under Secretary of Defense (Acquisition Reform), the Defense
Information Systems Agency, and the ECA-PMO.


We are sending copies of this report to the Director, Office of Management
and Budget; the Administrator for Federal Procurement Policy; the
Secretary of Defense and the Deputy Under Secretary of Defense for
Acquisition Reform; the Administrator for GSA; the NASA Administrator; and
other officials at the agencies included in our review. Copies will also be
made available to others upon request.

Please contact me at (202) 512-4587 if you or your staff have any questions
concerning this report. Major contributors to this report are listed in
appendix VIII.




Louis J. Rodrigues
Director, Defense Acquisition Issues




Page 24                                     GAO/NSIAD-97-26 Acquisition Reform
B-272646




List of Congressional Committees

The Honorable Ted Stevens
Chairman
The Honorable John Glenn
Ranking Minority Member
Committee on Governmental Affairs
United States Senate

The Honorable Strom Thurmond
Chairman
The Honorable Sam Nunn
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Christopher S. Bond
Chairman
The Honorable Dale L. Bumpers
Ranking Minority Member
Committee on Small Business
United States Senate

The Honorable William F. Clinger, Jr.
Chairman
The Honorable Cardiss Collins
Ranking Minority Member
Committee on Government Reform and Oversight
House of Representatives

The Honorable Floyd D. Spence
Chairman
The Honorable Ronald Dellums
Ranking Minority Member
Committee on National Security
House of Representatives

The Honorable Jan Meyers
Chairwoman
The Honorable John J. LaFalce
Ranking Minority Member
Committee on Small Business
House of Representatives


Page 25                                GAO/NSIAD-97-26 Acquisition Reform
Contents



Letter                                                           1


Appendix I                                                      28

Respondents to Our
Data Collection
Instrument
Appendix II                                                     29

FACNET Transactions
Appendix III                                                    32

Agency Responses to
Our Questions About
FACNET
Appendix IV                                                     35

Comments From the
National Aeronautics
and Space
Administration
Appendix V                                                      36

Comments From the
General Services
Administration
Appendix VI                                                     38

Comments From the
Office of Federal
Procurement Policy




                       Page 26   GAO/NSIAD-97-26 Acquisition Reform
                        Contents




Appendix VII                                                                                     40
                        GAO Comments                                                             45
Comments From the
Department of
Defense
Appendix VIII                                                                                    46

Major Contributors to
This Report
Tables                  Table II.1: FACNET Transactions, January-December 1995                   30
                        Table II.2: FACNET Transactions, January-March 1996                      31
                        Table III.1: Responses Concerning Future Use of Various EC               32
                          Tools or Methods, Including FACNET
                        Table III.2: Number of Responses Concerning Obstacles to                 33
                          FACNET Implementation
                        Table III.3: Responses Concerning Benefits of FACNET                     34

Figures                 Figure 1: Agency Views on Relative Importance of Various                  6
                          Electronic Procurement Methods
                        Figure 2: Reported Benefits of FACNET Realized by Federal                15
                          Agencies




                        Abbreviations

                        CCR         Central Contractor Registration
                        DCI         Data Collection Instrument
                        DOD         Department of Defense
                        EC          electronic commerce
                        EDI         electronic data interchange
                        ECA-PMO     Electronic Commerce Acquisition Program Management
                                         Office
                        FAR         Federal Acquisition Regulation
                        FASA        Federal Acquisition Streamlining Act of 1994
                        FACNET      Federal Acquisition Computer Network
                        GSA         General Services Administration
                        NASA        National Aeronautics and Space Administration
                        OFPP        Office of Federal Procurement Policy
                        VAN         Value-Added Network


                        Page 27                                   GAO/NSIAD-97-26 Acquisition Reform
Appendix I

Respondents to Our Data Collection
Instrument

              We sent a data collection instrument to 23 federal organizations. We asked
              electronic commerce program managers and comparable agency officials
              at Department of Defense, its 4 major buying components, and 18 federal
              civilian agencies to give us information and observations on their agencies’
              efforts to implement the Federal Acquisition Computer Network (FACNET).
              Eighteen of the 23 federal agencies responded to our questions from late
              March through May 1996. The 18 agencies were

              Defense Logistics Agency,
              Department of the Air Force,
              Department of the Army,
              Department of Commerce,
              Department of Defense,
              Department of Education,
              Department of Energy,
              Department of Health and Human Services,
              Department of Housing and Urban Development,
              Department of the Interior,
              Department of Justice,
              Department of Labor,
              Department of the Navy,
              Department of Veterans Affairs,
              Environmental Protection Agency,
              General Services Administration,
              National Aeronautics and Space Administration, and
              Office of Personnel Management.

              Five other agencies were sent data collection instruments but did not
              respond. According to data provided by the Electronic Commerce
              Acquisition Program Management Office and several individual federal
              agencies, these five agencies accounted approximately 0.3 percent of
              FACNET procurement actions in fiscal year 1995. (See app. II.) The five
              agencies were

              Department of Agriculture,
              Small Business Administration,
              Department of State,
              Department of Transportation, and
              Department of the Treasury




              Page 28                                      GAO/NSIAD-97-26 Acquisition Reform
Appendix II

FACNET Transactions


              Table II.1 shows, for calendar year 1995, the number of FACNET
              transactions in the following categories: public Request for Quotations
              (RFQ) or similar information, other solicitations or similar information,
              responses received from vendors, agency purchase orders, and agency
              delivery orders. Also, the last column shows the total dollar value of
              FACNET purchase and delivery orders most of the agencies (but not DOD)
              reported for calendar year 1995. Table II.2 shows similar data for the first
              quarter of 1996.




              Page 29                                       GAO/NSIAD-97-26 Acquisition Reform
                                          Appendix II
                                          FACNET Transactions




Table II.1: FACNET Transactions, January-December 1995
                                   Contract solicitations                                     Procurement actions
                                                     Other than         Responses to          Purchase         Delivery
Agency                        Public RFQs           public RFQs          solicitations          orders          orders         Value of orders
              a,b
Agriculture                             92                      10                   64              49                 0              $529,017
AIDa,c                                    0                      0                     0              0               27                         f

Commerced                              456                       0                2,891             184                 0             2,558,250
Defensed                            66,116                 41,057              478,894          105,217            4,698                         f

Education                               66                       0                  253              21                 1                   55,686
Energyd                                117                     149                  762             186               13              1,078,968
EPA                                     42                       0                   18               0                 0                       0
FEMAa,c                                   0                      0                     0              0                 0                       0
      d
GSA                                       5                      0                     2              0                 0                       0
HHSd                                   148                      10                  166              32            1,635            118,722,728
HUD                                       0                      0                     0              0                 0                       0
Interiore                             1,682                     87                6,566             577               20              4,479,054
Justice                                 83                       0                  139              17                 0                   45,501
Labord                                    0                     10                     0              0                 0                       0
          d
NASA                                    12                      17                     0              0                 0                       0
OPM                                     27                       0                   11               0                 0                       0
      a,b
SBA                                       0                      0                     0              0                 0                       0
Statea,b                                81                      10                  180              28                 0                  163,483
Transportationa,b                       67                       0                  102              43                 0                  347,957
Treasurya,b                            299                       0                1,462             242                 1             3,240,276
VAd                                       0                      0                     0              0                 0                       0
Total                               69,293                 41,350              491,510          106,596            6,395          $131,220,920f
                                          a
                                              Data not verified by agency.
                                          b
                                              Agency did not respond.
                                          c
                                              Agency not sent a data collection instrument.
                                          d
                                              Corrected data provided by agency.
                                          e
                                              Interior did not have data from the Defense gateway to report for October-December.
                                          f
                                          DOD and Agency for International Development did not report the value of their orders.
                                          Consequently, the total value of orders reported is underestimated, most likely significantly.

                                          Sources: Electronic Commerce Acquisition Program Management Office and supplemental data
                                          from the Departments of Commerce, Defense, Energy, Housing and Urban Development, Health
                                          and Human Services, Labor, and Veterans Affairs, Defense Logistic Agency, General Service
                                          Administration, and National Aeronautics and Space Administration.




                                          Page 30                                                      GAO/NSIAD-97-26 Acquisition Reform
                                           Appendix II
                                           FACNET Transactions




Table II.2: FACNET Transactions, January-March 1996
                                   Contract solicitations                                   Procurement actions
                                                      Other than         Responses to       Purchase           Delivery
Agency                         Public RFQs           public RFQs          solicitations       orders            orders        Value of orders
              a
Agriculture                              17                       0                  2                0                0                      $0
AIDa                                      0                       0                  0                0                0                       0
Commerce                                 58                       0                 639              21                0               284,000
Defensea                             22,335                 28,987             363,932          17,069                 0                      —c
Education                                 0                       0                  0                3                0                23,649
Energyb                                  86                      20                 776              60                2               631,983
EPA                                      13                       0                  16               0                0                       0
FEMAa                                     0                       0                  0                0                0                       0
GSA                                       0                       0                  0                0                0                       0
HHSb                                     73                       7                 282              12             736            53,396,540
HUD                                       0                       0                  0                0                0                       0
Interior                                645                       0              1,883             222                 0             1,584,508
Justice                                  18                       0                  0                0                0                       0
Laborb                                    0                       6                  0                0                0                       0
          b
NASA                                      2                       0                  60               1                0                      —c
OPM                                       2                       0                  0                0                0                       0
      a
SBA                                       0                       0                  0                0                0                       0
Statea                                   31                       0                 189              10                0                99,554
Transportationa                          12                       0                  79              13                1                94,716
Treasuryb                                55                      84                 101              17                0               234,478
VA                                        0                       0                  0                0                0                       0
Total                                23,347                 29,104             367,959          17,428              739           $56,349,428c
                                           a
                                               Data not verified by agency.
                                           b
                                               Corrected data provided by agency.
                                           c
                                             DOD and NASA did not report the value of their orders. Consequently, the total value of orders
                                           reported is underestimated, most likely significantly.

                                           Sources: Electronic Commerce Acquisition Program Management Office and supplemental data
                                           from the Departments of Energy, Health and Human Services, Labor, the Treasury, and NASA.




                                           Page 31                                                     GAO/NSIAD-97-26 Acquisition Reform
Appendix III

Agency Responses to Our Questions About
FACNET

                                          We asked EC program managers and comparable agency officials at DOD,
                                          its 4 major buying activities, and 17 federal civilian agencies to give us
                                          information and observations on FACNET implementation. Officials from 18
                                          agencies responded. Their responses to our questions about future use of
                                          various EC procurement tools, obstacles to FACNET implementation, and
                                          benefits of using FACNET are shown in the following three tables.


Table III.1: Responses Concerning Future Use of Various EC Tools or Methods, Including FACNET
Question: To what extent do
you expect these EC “tools”                                      To a
to be important to your         To little or    To some     moderate     To a great     To a very           Do not
agency through 1999?             no extent        extent       extent        extent great extent             know           Total
A. FACNET                                0                  4                4             4        3            2            17a
B. Some Alternative                      2                  3                3             1        4            4            17a
  Government EC Solution
C. Internet                              1                  2                3             4        6            1            17a
D. Agency-Unique System(s)              10                  0                2             2        0            3            17a
  or Architecture
E. Your Agency’s Electronic              8                  1                2             2        1            3            17a
  Bulletin Board
F. Electronic Catalogs                   1                  0                7             4        4            1            17a
G. Other                                 0                  0                0             0        2            0             2b
                                          a
                                              One agency did not reply to this question.
                                          b
                                              Agency officials not required to respond.

                                          Source: Our analysis.




                                          Page 32                                              GAO/NSIAD-97-26 Acquisition Reform
                                                   Appendix III
                                                   Agency Responses to Our Questions About
                                                   FACNET




Table III.2: Number of Responses Concerning Obstacles to FACNET Implementation
Question: To what extent, if at all, is each                                To a
an obstacle to your agency’s efforts to      To little or   To some   moderate                         To a great   To a very
implement FACNET?                             no extent       extent     extent                            extent great extent         Total
A. Lack of funding needed                                            7                7            0           1            3            18
B. Lack of other resources needed                                    3                7            3           3            2            18
C. Lack of effective leadership within your                         14                4            0           0            0            18
  agency
D. Lack of effective policy leadership                               2                2            2           5            7            18
  outside your agency
E. Lack of effective government-wide                                 1                2            2           7            6            18
  program management
F. Lack of effective FACNET engineering                              1                2            1           2           12            18
  and operational management
G. Lack of a sound FACNET infrastructure                             0                0            3           3           12            18
 that works “end to end”
H. Lack of a CCR database that is well                               0                0            1           4           12            17a
  populated and operational
I. Lack of a clear definition of “single face to                     3                1            5           3            6            18
   industry”
J. Lack of a well-defined federal strategy for                       3                4            6           1            4            18
  use of FACNET
K. Lack of well-defined FACNET strategy in                          16                2            0           0            0            18
  your agency
L. Lack of consistent, helpful, or practical                         2                5            3           3            4            17a
  outreach information for vendors
M. Lack of integration of FACNET into your                          13                3            1           1            0            18
 agency’s systems
N. Lack of data security                                            10                4            3           1            0            18
O. Use of EDI has made the FACNET                                    7                4            2           4            0            17a
 development or simplified acquisition
 processes more difficult
P. Fragmented standards implementation                               3                4            5           3            3            18
Q. Obstacles caused by the statutory                                 7                4            3           2            2            18
 requirements for FACNET
R. Other management, operational, legal, or                          0                0            0           1            2             3b
  policy problems
                                                   a
                                                       One additional response was marked “unknown.”
                                                   b
                                                       Agency officials not required to respond.

                                                   Source: Our analysis.




                                                   Page 33                                                GAO/NSIAD-97-26 Acquisition Reform
                                                 Appendix III
                                                 Agency Responses to Our Questions About
                                                 FACNET




Table III.3: Responses Concerning Benefits of FACNET
Question: To what extent is each a
direct/indirect benefit that has been or is                                                     To a
being realized in your agency from federal     To little or                To some          moderate   To a great   To a very
efforts to implement FACNET?                    no extent                    extent           extent       extent great extent         Total
A. Saving money                                                    7                4              3           1            2            17a
B. Reduced processing time                                         8                3              4           1            1            17a
C. Increasing competition/small business                           5                5              2           3            2            17a
  opportunities
D. Better management information                                  10                3              2           1            0            16a,b
E. Improved payment process                                       13                2              0           1            0            16a,b
F. Increased productivity of agency                                8                4              1           1            1            15a,c
  personnel
G. Policy lessons learned that will likely                         4                3              3           5            2            17a
 benefit the government in the future
H. Technical lessons learned that will likely                      2                3              3           5            4            17a
  benefit the government in the future
I. Enhanced EC-related knowledge, skills,                          2                2              6           4            3            17a
   or abilities of federal personnel that will
   likely benefit the government in the future
J. Fostered better cooperation and/or                              5                6              4           0            2            17a
  coordination between the EC and
  acquisition organizations
K. Forced or encouraged federal agencies                           3                4              4           2            4            17a
  to better manage EC efforts
L. Promoted EDI in the government                                  1                7              1           4            4            17a
M. Other                                                           0                0              0           0            2             2d
                                                 a
                                                     One agency official did not respond.
                                                 b
                                                     One additional response was marked “unknown.”
                                                 c
                                                     Two additional responses were marked “unknown.”
                                                 d
                                                     Agency officials not required to respond.

                                                 Source: Our analysis.




                                                 Page 34                                                  GAO/NSIAD-97-26 Acquisition Reform
Appendix IV

Comments From the National Aeronautics
and Space Administration




              Page 35         GAO/NSIAD-97-26 Acquisition Reform
Appendix V

Comments From the General Services
Administration




              Page 36         GAO/NSIAD-97-26 Acquisition Reform
Appendix V
Comments From the General Services
Administration




Page 37                              GAO/NSIAD-97-26 Acquisition Reform
Appendix VI

Comments From the Office of Federal
Procurement Policy




              Page 38          GAO/NSIAD-97-26 Acquisition Reform
Appendix VI
Comments From the Office of Federal
Procurement Policy




Page 39                               GAO/NSIAD-97-26 Acquisition Reform
Appendix VII

Comments From the Department of Defense


Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




See comment 1.




Now on page 2.
See comment 1.




                             Page 40   GAO/NSIAD-97-26 Acquisition Reform
                 Appendix VII
                 Comments From the Department of Defense




See comment 2.




Now on page 3.
See comment 1.




Now on page 4.
See comment 1.




                 Page 41                                   GAO/NSIAD-97-26 Acquisition Reform
                  Appendix VII
                  Comments From the Department of Defense




Now on page 6.
See comment 2.


Now on page 9.
See comment 2.




Now on page 11.
See comment 1.




Now on page 11.
See comment 3.




                  Page 42                                   GAO/NSIAD-97-26 Acquisition Reform
                  Appendix VII
                  Comments From the Department of Defense




See comment 1.




Now on page 12.
See comment 1.




Now on page 20.
See comment 1.




                  Page 43                                   GAO/NSIAD-97-26 Acquisition Reform
Appendix VII
Comments From the Department of Defense




Page 44                                   GAO/NSIAD-97-26 Acquisition Reform
               Appendix VII
               Comments From the Department of Defense




               The following are GAO’s comments on the Department of Defense’s letter
               dated November 27, 1996.


               1. We made changes to the report to reflect DOD’s comments.
GAO Comments
               2. Through the completion of our audit work in September 1996, agencies
               and vendors continued to identify operational problems with the
               infrastructure and the CCR database. Although DOD stated that it was not
               experiencing any operational problems as of late November because of
               recent enhancements, we believe insufficient time has elapsed to verify
               whether the operational problems have been eliminated.

               3. According to the Director for DOD EC, as of December 5, 1996, DOD has
               not issued policy guidance on the use of faxes pertaining to FACNET
               solicitations.




               Page 45                                     GAO/NSIAD-97-26 Acquisition Reform
Appendix VIII

Major Contributors to This Report


                        Kevin M. Tansey
National Security and   Patricia D. Slocum
International Affairs   Thomas W. Hopp
Division, Washington,
D.C.
                        Carl M. Urie
Accounting and          Gwendolyn A. Dittmer
Information
Management Division
                        John A. Carter
Office of General
Counsel




(705121)                Page 46                GAO/NSIAD-97-26 Acquisition Reform
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