Note Abstract

DOCUMENT RESUME

ED 067 108 LI 003 853

TITLE Automatic Data Processing Equipment; Report of the Committee on Government Operations on H.R. 4845. INSTITUTION Congress of the U. S., Washington, D. C. House Committee on Government Operations. PEPORT NO HR-802 PUB DATE 65 NOTE 80p.;(0 References)

EDRS PRICE MF-$0.65 HC-$3.29 DESCRIPTORS *Automation; Computers; *Data Processing; *Electronic Data Processing; *Equipment; *Federal Government; Federal Legislation; Management

ABSTRACT The purpose of this legislation is to establish the authority and provide the operational machinery needed for the effective and efficient management of Automatic Data Processing (ADP) equipment. Following the statement of the purposes of the bill, this report contains: a summary, discussion, the committee amendments, a section by section analysis, and agency reports on the bill.(The 1971 Hearing of the Committee on Government Operations on Automatic Data Processing is available as LI 003 854.) (NH) C 41/4.x- Union Calendar No. 360 89th Congress, 1st Session U.S. DEPARTMENT OF HEALTH,House Report No. 802 EDUCATION & WELFARE OFFICE OF EDUCATION THIS DOCUMENT HAS SEEN REPRO. DUCED EXACTLY AS RECEIVED FROM THE PERSON OR ORGANIZATION ORIG INATING IT. POINTS OF VIEW OR OPIN IONS STATED 00 NOT NECESSARILY REPRESENT OFFICIAL OFFICE OF EDU CATION POSITION OR POLICY. AUTOMATIC DATA PROCESSING EQUTPMENT

REPORT.

OF TILE COMMITTEE ON GOVERNMENT OPERATIONS

, o H.R. 4845.:. c 6 I A BILL TO AMEND TITLE I OF THE FEDERAL PROPERTY AND ADMINISTRATIVE .SERVICES ACT OF 1949 TO PROVIDE FOR THE ECONOMIC AND EFFICIENT PURCHASE, LEASE, MAINTENANCE, OPERATION, AND UTILI- ZA NON OF AUTOMATIC DATA PROCESSING EQUIPMENT BY FEDERAL DEPARTMENTS AND AGENCIES

AUGUST 17,1965.Committed to the Committer of the Whole House the State of the Union and ordered to be printed

U.S. GOVERNMEN r PRINTING OFFICE 50.006 WASHINGTON : 1965 a COMMITTEE ON GOVERNMENT OPERATIONS WILLIAM L. DAWSON, Illinois, Chairman CHET HOLIFIELD, California CLARENCE J. BROWN, Ohio JACK BROOKS, Texas FLORENCE P. DWYER, New Jersey L. H. FOUNTAIN, North Carolina ROBERT P. GRIFFIN, Michigan PORTER HARDY, an., Virginia OGDEN R. REID, New York JOHN A. BLATNIK, Minnesota FRANK J. HORTON, New York ROBERT E. JONES, Alabama DELBERT L. LATTA, Ohio EDWARD A. GARMATZ, Maryland DONALD ItUMSFELD, Illinois JOHN II. MOSS, California WILLIAM L. DICKINSON, Alabama DANTE B. FASCELL, Florida JOHN N. ERLENBORN, Illinois HENRY S. REUSS, Wisconsin HOWARD H. CALLAWAY, Georgia JOHN S. MONAGAN, Connecticut JOHN W. WYDLER, New York TORBERT H. MACDONALD, Massachusetts J. EDWARD ROUSH, Indiana WILLIAM S. MOORHEAD, Pennsylvania CORNELIUS E. GALLAGHER, New Jersey WILLIAM J. RANDALL, Missouri BENJAMIN S. ROSENTHAL, New York .IIM WRIGHT, Texas FERNAND J. ST GERMAIN, Rhode Island DAVID S. KING, Utah JOHN G. DOW, New York HENRY IIELSTOSKI, Nes Jersey CHRISTINE RAT Dtvts, Staff Director JAMES A. 1..txmAx, General Counsel Mu,as Q. Rom stlx, Associate General Counsel J. P. CARLSON, .Minority Counsel RAYMOND T. Co Ltaxs, Minority Professional Staff

GOVERNMENT Acrivams Suncom NIITTEE JACK BROOKS, Texas, Chairman WILLIAM S. MOORHEAD, Pennsylvania OGDEN R. REID, New York DAVID S. KING, Utah JOHN W. WYDLER, New York DANTE B. FASCELL, Florida BANSST C. BAYNARD, Staff Administrator WILLIAM M. Josts, Counsel IRMA REM, Clerk Lvxsn Clerk It

2 CONTENTS

Page I. Purposes of the hill 2 II. Summary 2 III. Discussion 6 A. What. is ADP? 6 Analog computers 7 Digital computers 7 Binary numbers system 7 ADP system made up of components 8 A lass produced components 9 General purpose components 9 Software 9 Domination of ADP industry by 113AI 11 Leasing of ADP equipment 11 Third generation Al I° 12 B. Current Government ADP management techniques 13 ADP management study by BOB in 1958 14 BOB management guidelines 16 Ineffectiveness of guidelines 17 C. TheneedforGovernment-wide coordinationin Al)P management 17 Coordination fundamental to good management 17 Government-wide coordination recommended by GAO in 1958 18 Comptroller General r,!commendationsin1960 and 1963 19 Report by (1A0 in 1964 19 D. Effective Government -wide management of ADP provided by 11.11 4845 20 Responsibilities of BOB, GSA, and the Department of Commerce 20 BOB control over fiscal and policy matters 21 General operational responsibility in GSA 21 Technical support of the National Bureau of Standards_ 22 E. How the authority delegated in 11.11. 4845 would be used to improve, Government ADP management 23 Continuous flow of recurring data provided by 11.11. 4845 23 Optimum utilization of ADP through sharing and service centers under 11.11. 4845 25 P. 11.11. 4845 would provide for more economieA DP aequiition__ 26 Strengthening of Government's bargaining position__ 26 Volume discounts from volume procureinent 27 Single purchaser concept 28 Acquisition of general purpose components of unique systems under in volume procurement program 28 Use n; revolving fund provided in H.R. 4845 to obtain volume acquisitions 29 Other advantages provided by volume procurement 30 Lo le versus purchase evaluations on a Government- wide basis under 11.11. 4845 30 Priority of purchase of systems with greatest purchase advantage under consolidated procurement 32

III a IV CONTENTS III. DiscussionContinued G. II. R. 4845 authorizes exemptions and permits GSA to del-Pap epic authority to agencies in the acquisition of equipment_ 33 Exemption of individual systems for reasons of national security or defense or economy and efficiency 34 Exemption of equipment by agency heads 3.1 Gradual implementation of management program 15 II.Conclusion 16 IV. Committee anionchnents 6 V. Section-by-section analysis of IL It. 4845 35 VI. Agency reports on II. It. 4845 41 Changes in existing law made by the bill, as reported 67 Additional views 76

4 Union Calendar No. 360 liNn CONGRESS 1 HOUSE OF REPRESENTATIVES REPORT ist Session f No. S02

AUTOMATIC DATA PROCESSING EQUIPMENT

AUGUST 17, 1:1G5.Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. BROOKS, from the Committee on Government Operations, submitted the following REPORT [To accompany H.R. 4845]

The Committee on Government Operations, to whom was referred t he bill (1-1.11. 4845) to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automat ic data processing equipment by Federal departments and agencies, having considered the same, report favorably thereon with amendments and recommend that the bill as amended do pass. The amendments are as follows: 1. Page 2, line 1, delete ", or at the expense of,". 2. Page 2, line 12, delete "require" and insert, in lieu thereof "provide for 3. Page 3, line 15, following the word "of", insert "equipment inventory, utilization, and acquisitions. together with an account of". 4. Page 5, line 22, delete the following : "and other users". 5. Page 5, line 23, delete "requirements." and insert in lien thereof "requirements, including the development of specificraions for and the selection of the types and configurations of equipment, needed.". 6. Page 6, line 1, delete the following: "or user". 1 2 AUTOMATIC DATA PROCESSING EQUIPMENT I. PURPOSES OF THE BILL The findings on the impact of ADP previously reported herein indicate that dynamic leadership of the ADP program of the Federal Government is a vital necessity. Passive, partial, or informal types of leadership have had their place, but have now outworn their usefulness.1 /.959 Bureau of the Budget Automatic Data Processing Responsibilities Study. After 6 years, I he type of leadership the Bureau of the Budget (13013) recommended in this early out omatic data processing (ADP) management study has yet to be realized.This legislation would establish the authority and provide the operational machinery needed for the effective and efficient management of this costly equipment. During the years following issuance of the 13011's 1959 ADP st udy, the Comptroller General has issued approximately 100 audit reports severely cri:ical of Government ADP management. Over the years, !le has cont inuously emphasized and demonstrated the need for Guy- ernment-wide coordinat ion in ADP management. Federal ADP expenditures now exceed $3 billion annually and the Conlin roller Gen- eral conservatively estimates with regard to the equipment coining within this management program that approximately $:200 million a year can be saved through the use of long recognized and accepted management techniques provided in this legislation. This committee recommended similar legislation to the I rouse on Juno 19, 1963 (II. Rept. 42S, 88th Cong., 1st sess.), and that legislation, as amended (11.11.51171), was approved July 18, 1963. II. SUMMARY 'rho Federal Government is the largest user of ADP in the world with annual expendit tires exceeding $3 billion or approximately 3 per- Lent of the Federal budget. There are now an estimated 2,000 computer systems in use in the Federal Government. What 'is ADP? Automatic data processing (ADP) is the concept whereby a machine or computer can accept information or "input data," process the data according to a predetermined "program," and provide the results in a usable form. Data processing computers are either analog, which measure "how much," or digital, which calculate numbers or compare, nonnumerical data encoded in digital form. Most ADP in use is digital in design, and it is this type of equipment that is the principal concern of the legislation. The heart of an ADP system is the processor or "main frame" with+ contains the complex electronic circuits which accept and process data. The processor in conjunction with input, output, and storage components such as a tape unit, a card pinch, a memory component, a printer, and so forth. make, up a computer system.The system is "designed" or "configured" by combining various of these mass produced components, the combination depending on the part icular needs 1"Report of lltolloas eqi RecommemInttons RrsoltIng Prom the Antonin tie Doh Prners- slna Rpsponsibilliapo Study, September 1958 .Tone 1959."Bureau of the Budget. p. 20.Reprinted in bearffigs on II.R. 4845, 89th Cong., 1st peso., p. 590. AUTOMATIC DATA PROCESSING EQUIPMENT of the user.Most. components are general purpose in design and the system can be programed to perform various functions.About 00 percent of the computers in Government are general purpose. In addition to the "hardware," the user must also obtain the instructions and procedures needed to operate the system. These are called "soft - ware" and often constitute a substantial portion of the cost of an ADP system. The technological evolution of ADP has entered the third generation.The first z.reneration equipment contained electronic vacuum tubes while the second generation equipment introduced solid state transistors.The third generation will integrate ADP with communications systems whereby central computers of high capacity will supply the needs of many users. Overall equipment costs will be substantially higher but unit processing costs to the individual user will be markedly reduced. As third generation time-sharing increases, the traditional agency-by-agency structure of the Government in terms of ADP management will become less apparent; and less important and the costs of any deficiencies in Government ADP management will reach staggering proportions. Current Government -ADP management techniques In the 1950's, existing management policies applicable to calculators, punched card, and other ollice equipment were extended to ADP. 13nreau of the Budget (BOB) concern over ADP management was usually limited to the annual agencywide Weigel- review processes. In 1958, however, B013 began a comprehensive Government "ADP Responsibilities Study" concluding that "dynamic, leadership" in Gov- ernment, ADP management was a "vital necessity." The study recognized the need for specialized management of ADP, for Government- wide coordination, and for accurate up-to-date information for all levels of management. A subsequent BOB study in 1965 recognized many of these same deficiencies. Despite recognition of this need for a change in the concept of ADP management as reflected in the 1959 BOB study, overall Government management, was limited to the issuance of advisory "guidelineh- to the various agencies by BOB. Guidelines and bulletins have been issued on ADP feasibility studies, lease versus purchase evaluations, inventory reports, and sharing programs. Since 1959, the General Acconnting Office (GAO) has issued about 100 audit reports revealing serious shortcomings in the acquisition and use of ADP in various departments and agencies as well as ADP acquired under cost reimbursable contracts at the expense of the Gov- ernment.Most of the deficiencies constituted violations of BOB guidelines. The need for Government-wide Coordination in ADP management Coordination is fundamental to good management, as has been proved in Government and linsiness numerous times. The Secretary of Defense. has applied this e6ncept to a number of functions of DOD achieving significant improvements. On four occasions, in 1958, 1960, 1963, and 1964, the GAO has submitted comprehensive ADP inanacrement studies to Congress illustrat- ing the improvements that, can be made through Government-wide coordination in ADP management-.The studies, backed up by the specific findings of mismanagement as illustrated in ahnost 100 other 4 AUTOMATIC DATA PROCESSING EQUIPMENT audit reports, support the proposition as embodied in H.R. 4845 that certain aspects of Government ADP management be coordinated on a Govermnent-wide basis.Through this approach, the Comptroller General conservatively estimates with regard to the ADP equipment that would come within this management program that savings of between $100 million and $200 million annually will be realized without compromise in user agency selection or use of equipment. Effective Government-wide management of ADP provided by H.R. 4845 Mil. 4845 delineates the responsibilities of BOB, GSA. and the De- partment, of Commerce and provides a stronger organization plan for Govermnent ADP management. The bill maintains BOB's traditional control over fiscal and policy matters. Action by any agency under this legislation would be subject to either approval or review by B011. GSA, in line with its traditional authority, is delegated operational responsibilities for coordinating Government ADP under H.R. 4845. GSA would administer an ADP "revolving fund" which should Fro- vide (1) more adequate management, information, (2) optimum utilization, and (3) economic acquisition of Government. ADP. The National Bureau of Standards would offer technical support to the management program and will work toward ADP compatibility. The authority in this legislation would supplement the Government research effort in coordination with other Federal agencies. H.R. 4845 would provide a continuous flow of recurring data needed for effective and efficient management Presently BOB issues only an annual inventory report wholly inadequate for ADP management purposes.Inventory and fiscal information is needed to maintain policy and budgetary control, increase utilization, and provide more economical acquisition of equipment. Under this legislation, GSA would establish such a comprehensive inventory.This inventory L.9upled with the fiscal information flowing from the operations of the "revolving fund" would afford all levels of Government with more adequate information necessary for effective and efficient management. The availability of information on prospective Government requirements should also provide for fairer competition among all ADP manufacturers. Optimum, utilization of Government ADP There is widespread waste in available but unused Government, ADP equipment time. On June 16, 1964, BOB set up an ADP sharing program under GSA. This legislation would, however, substantially improve the effectiveness and efficiency of GSA's interagency coordinating efforts. GSA would also he authorized to establish multiagency service centers to furnish ADP capacity to several users. More economic acquisition of ADP This legislation would strengthen the Government's bargaining position in acquiring ADP. The Government now obtains no special advantages as a volume purchaser. Under the GSA. supply schedules, price determinations and procurement are divorced. To obtain volume discounts, the. Government must have volume procurement rather than a piecemeal agency-by-agency procurement. The traditionally accepted solution to this type of problem has been the "Angle purchaser" concept.The Govermnent would be in a AUTOMATIC DATA PROCESSING EQUIPMENT 5 stronger bargaining position were all its ADP purchase and lease money in -one pocket." Whenever feasible, general purpose components, including those used in specially designed ADP systems, would be acqnired under a volume procurement program. Government software acquisition could also be subjected to more orderly procurement, procedures. The revolving fund would be used to consolidate volume acquisitions. GSA would acquire the ADP systems selected by the management of the agencies and, in effect, the agencies would then lease equipment from the GSA revolving fund reimbursing the fund periudically at rates reflecting the use value of the equipment. GSA could obtain direct appropriations covering overhead expenses incident to operating the revolving fund. Usefullife to the Government as a whole In addition to volume procurement, Government-wide coordination would provide an effective means for making "lease versus purchase" evaluations on the basis of the benefit to the Government as a whole. Lease versus purchase evaluations should be made from the standpoint of the estimated useful life of the equipment to the Government as a whole rather than the estimated period of application of the initial user agency. At t his time, lease payments generally equal the cost of ownership within 2% to VA years although the useful life of most ADP equipment. is estimated at between 5 and 10 years. The Government has countless needs for ADP and the GAO logically suggests that the estimated period of application by the initial acquiring agency may not constitute a realistic estimate of the economic useful life to the Government as a whole. It is not unrealistic that officials cognizant of Government inventories and needs could not, on a sound, businesslike basis, at tribute secondary usage potential to selected systems which have long-range utilization within the Government.Ton often, at present, the Government in a period of from 2 to 5 years pays rentals approximating or even exceeding the purchase pricebut ends up not owning the equipment which might have considerable economic life 'fa. it.And, assuming that some further utilization did not develop, the Government could get the benefit of some return on investment through the sale of the equipment as surplus property. The revolving fund would have other advantages. As an example, those systems with the highest comparative purchase advantage for the Government as a whole could be purchased while systems offering less purchase advantage could he leased.There may not always be sufficient capital for the Government to purchase all its ADP which should be purchased.Budgetary considerations and funding problems in the agencies should not interfere with the purchase on a priority basis of that equipment having the greatest purchase advantage. ExenytionR for national security and defense ILI:. 4845 is aimed at. general purpose commercially available ADP systems and components.Specially designed components forming a part of tactical weapons or space systems which have no general pur- ose applicability are not involved in this program. However, general purpose commercially available ADP components used in conjunction with specially designed components and as parts of systems with unique scientific, cryptologic, or military applications would come within provisions of this legislation for acquisition, inventory 01 9 6 AUTOMATIC DATA PROCESSING EQUIPMENT control, and potential secondary usage although such components or systems might not he available for sharing. The Administrator of GSA is authorized to exempt individual sys- ems from provisions of t his program to avoid compromise of our na- t inual security or defense and to assure economy and efficiency. As this pm ire management procrrain would be under he policy control of the BOB and the express direction of the President, it is not, necessary or advisable to authorize discretionary authority in agency heads to exempt, equipment; from the prognun. The Administrator is further authorized to delegate nut hority extended kiln under t his lei islat ion to ho extent he considers necessaiy and desirable for the orderly implementation of the program. Conchtsion. This legislation is essential to effective Government ADP management. Based upon two comprehensive BOB ADP management, sfud- ies,about, 100 General Accounting Oflice audit, reports, and 3 years of active invest igat ion by this committee, the f ime has come for Congress to take reasonable but effective act ion to assure the establishment of efficient A DP management in Government. III. DISCUSSION The Federal Government is the largest user of automatic data processing in the world.Annual Federal ADP expenditures exceed $3 billion, or approximately 3 percent of the Federal 'midget.The taxpayers' present investment, nu ADP is unknown.But, at this time. ADP usage in the Government is doubling about every 3 years and is expected to increase indefinitely. The first all-electronic computer was constructed during World War II and delivered to the. Army Ordnance Corps in. 1915. UNIVAC I, ho first, computer with general data processing capability, was installed at, the Bureau of the Census in 1951. In 1951, (hero were 10 computer systems in operation within the Federal Government,. By 1902, the number had increased to 1.000. There are now at least 2,000.' And, these figures do not include, an estimated 1.000 to 2,000 systems contractors barn either leased or purchased at the Government's expense. Nor do these totals include, computer components forming a part of tactical weapons and defense systems or operational elements in missile and space, veil idles which are not included under this management program. A. Wuxi! Is ADP? Automatic data processing is the concept whereby a machine or computer can accept information or "input. data," process the data according to a predetermined "program," and provide the results in a usable form. In an automatic data processing system, the electronic computer is the heart or focal point of the system. An ADP system con- sists of a number of components including input, processing, storage, and output devices. Data processing computers are either analog or digital in design. 21954 Inventory of Automatic Data Processing Equipment In the etlerol Government, Bureau of the Budget, July 19(14,

10 AUTOMATIC DATA PROCESSING EQUIPMENT 7

ANALOG COMPUTERS Analog computers measure "how nmeh." Analog computers use electric current coupled at times with mechanical devices to simulate the variable factors of some action, circumstance, or phenomenon which cannot be effectively measured or evaluated directly, or the factors of some hypothetical problem or mathematical equation.The analog computer correlates the relationship between these factors and furnishes a measure or magnitude (how much) of whatever resultant the computer operator seeks to obtain. In the past, analog comput ers have been principally used in scientific work and make up only a small percentage of the computers now in use.'

ma ITA com Most computers are digital in design.Digital computers calculate, compare. and process information. They are essentially electronic, arithmetical, calculating machines with the additional capacity to compare, arrange, sort., store, and identify data.Digital computers can he used in any area of human endeavor where computations are required or information of any kind has to be processed or simulated. The basic concept of the digiLal computer has long been recognized and is relatively easy to understand, but the electronic circuitry and the manufacturing techniques implementing these concepts are new and exceedingly complex.

isrx,urr NII3iliERS SYS'ITINL Digit al computers generally use the binary (base 2) numbers system rather t haul the decimal (base 1.0) system we normally consider as the only natural approach to arithmetic.Theoretically, a digital computer might he designed to any numbers base.However, the binary systemis. easiest.Only combinations of two symbols, ami "1", are.netbdvd to express ally numberno matter how large. Under the (lemma Inumbers system, 10 different symbols are used to represent the series of magnitudes from zero to nine.Then for magnitudes of I() and above, these, same unique number symbols are simply reposi- tioned. The binary system follows the same approach except. that the reuse of symbols begins with "2'' rat her than "10", as follows: Decimal : Dinar?,

1 1 2 10 11 4. 100 5_ 101 110 111 8_ 1000 9 1001 .10 1010 11.. 1011 -rile on Fortress HIM." Fortune, VOL LXIX. No. 0 (June 1664). p. 207 '"there to tin. ntuting.computtr Industry, whose 1903 volume woo around $15 million and whose sales are growing nt better than 15 percent n year.The analog unlike the digital computer does not count sequentially and has no memory. but It compares ninny quantities simultaneously, and so provides itswift way of looking at a complex system all nt once. In 'real thee.'It Is Indispensable In such Jobs ns military fire control, and Is much used In simulation.'lite IBM of the analog-computer industry to Electronics Associates of Long liraneli. N.J., whteh last year yarned about $2.200.000 on $29 million sales.Some others III the field are lieu lnstrumentit, Vteder-ltoot, and Westinghouse." S AUTOMATIC DATA PROCESSING EQUIPMENT The advantage. of the binary system is also that, tlw "0" and the "1" tie in neatly with the mechanical and electronic concepts around which the computer and its satellite components are designed.

ADP SYSTEM NIAM1 UP OP COMPONENTS Various components make up an ADP system.The principal component of the digital computer is the processor or "main frame." The processor contains complex electronic circuits which can accept. and process digital information.Iii simplest terms, each of these electric circuits contains a switch.The switch may be closed or open, and depending on the position, electric current flows or does not flow through the circuit. The position of the. switch and the flow of current correspond to the "0" and the "1" of the binary numbers system. The processor or main frame accepts "input," in formation usually fed into it. from punched cards or nutgnetic tape components. On the punched cards at predetermined locations there is either a hole through which an electric contact can be made, or there is the absence of a hole so no electric contact can be made.Similarly, on magnetic tape there is either a magnetized spot or the absence of such a spot.On both the card and the tape, the presence or absence of a hole or magnetized spot corresponds to the binary numbers system symbols, "0" and "1," and, therefore, the open or closed circuit described above. The processing unit, having received the information, processes the in formation according to the programed arrangement of the electronic circuitry.This proirram of instructions, together with part of the data to be processed, is stored in the computer system's memory component,In the most popular type of memory component, tiny ferro- magnetic cores are used.These are either positively or negatively magnetized, depending upon the direction in which electricity passes through them. As in the case of the other components described above, these two condit ions likewise correspond to the "0" and the "1" in the binary numbers system. One informational channel consisting of one series of these units that is, a single circuit, one memory core, or one position on a card or tapewould have practically no processing potential.But. use of a group of these informational channels, in parallel, provides this potential.With the addition of every informational channel in the processor, a larger digital number can be handled. The combinations possible through the use of several parallel channels are sufficient to en- code each of the letters of the alphabet. As a result, large numbers and words can be fed into and processed in the computer.Further- more, in a memory component, hundreds of thousands of cores can be arranged to store and retrieve vast amounts of digital data or en- code first letters, then words, and thereafter long progressions of information, After processing. the information obtained is transferred to another computer unit, the "output" component, which may be a tape unit, a card punch, a printer, or some type of visual display.If necessary, this unit can translate the information from binary terms into words, the decimal system, or some other usable form.Or, rather than "reading out" its results, the digital computer can be a part of a control system wherein information is fed into the processor on a "real time" basis and the results almost instantly transferred to some control mechanism. AUTOMATIC DATA PROCESSING EQUIPMENT 9 Certain digital computer components are also used in conjunct ion with special scientific elements of unique design for scientific studies and investigations.Also, computers, or components thereof, may he coupled with cryptologic devices in security or intelligence work.

MASS PRODUCED COMPONENTS ADP manufacturers mass produce the various components that make up a cmnput er system.ADP systems are "configured"' (:attached by cables and essentially "plugged" together) by combining the mass produced components previously described necessary to meet the requirements of a particular user. The task to be performed determines the arrangement, number, and type of components that make up a computer system. For economic and .competnive reasons, only the smallest systems are designed and manufactured as a single. unit. Since a system is made up of separate components, the customer is not asked to pay for punched card, tape, memory, printer, or other components or capacity not needed in his particular application.

GEN ERA PURPOSE COMPON ENTS 3fo4. A DP components are general purpose in design and can he used in a variety of applications.Most digit al comput er systems can be programed to perform a wide variety of functionsadministrative and technical. That equipment designed to be used in these various systems for the performance of different functions is known as "gen- end purpose" equipment. About 90 percent of the computers in Gov- ernment art' general purpose.'the table on the following page has been included as an indication of the varied applications of the general purpose ADP systems of which the Government has 10 or more. Spe- cially designed equipment for unique scientific mid technical purposes has liven decreasing.Computer manufacturers constantly strive for flexihility in the design of their components in order to give them as broad a potential application as possible. Under the concept of "general purpose" equipment, the combinat ion of mass produced components can be easily altered to perform any task within the basic system's maximum capacity without rebuilding the processor or internally modifying the individual component parts even though the system may have been originally configured to perform one particular narrow function. If additional memory is needed for a new application, additional memory components can usually be added. If additional reading capacity is required, additional punched card or tape units can be obtained. Similarly, unnecessary components can be easily discarded. SOI"I'W.DtE One t a user has acquired an ADP system., complexities arise relating to its use. ADP systems re4111 i re complex inst met ions to operator and inainne. Operations must. he charted in proper sequence and the system set up or programed to perform the necessary funct ions to aehie.ve the desired result. To fulfill the needs of many users there are, also "canned" programs written for general application which often require, only minor revisions for any particular application. The terns "design" is sometimes timed to denote what is really configuration.A component is "designed" by the manufacturer to overate in a certain manner. A system is "configured" by combining the s into au for a particular applien I ion. Major application areas of use of computer types showing an estimated number of installations of 10 or snore for June SO, 1.965, as reported in Ihe System type Bureau of the Budget's 1.904 inventory of AD!' equipment in the Federal Uovernment 1995installed, (sti-JuneNumber 30. (materials) Supply (facilities)Property Financial Personnel resourcesNatural Operations Operations control and Scientific and IBM 1101 mated) 422 s; N' ,, 11 support 11 engineering 11 11111UN1NCR 1050391) BIM 1(4176 1jtj VNt N' N. V:4 VN' .. V VN' V4 IIBMC1)0RC 1 1M A 1410 190;190AT099,91:sot '44'4'OS7075 s.s'V V V V Vs N'V.,, ,1VN' Nr4v CGE I) RCAC;'''.5 1.15 501 243031 V1 11 V 11V V .., .,,V ..'V V4 IBMIBM11131 707o54UM 70st) 3057040/44 1214 '19202324 V V V.' V4 Vsf V..,1 i4 11131ACTPAHIBM(iN P 1410 250I.t116o.Itee 130 )_ 151617I.IT Vs 4 VV vV V v , v NCSOS It 315 011 15It N' si :V V; ..V V4 - ' V V .51)AUN!itoNCl)(CDC OM IIII'04 it-inSlY) I:11it12 - NIV V V V V V AUTOMATIC DATA PROCESSING EQUIPMENT 11 The ancillary tech»ignes and aids needed for proper utilization of an ADP system are commonly referred to as "software." In most in- ances,, ina faaarers' sale and lease prices include software. The costs attributable to software in the case of some ADP equipment may exceed t hat Of the "hardware" or, in other words, of the components of the system. no:in x-,vrtox OF tior ima7sT1tv BY WM There have been some 2:1 American ADP maim facturers, of which about 20 are current ly ma no fact tiring etplipment which has been ordered.There are an irosimat ely 25,000 computers` of American manufacture in use in the world and an estimated 10,000 additional systems on order. intermit nd Business Machines (1151[), although operating under a 1056 antitrust consent decree " dominat es t he market with about, 75 percent of the business.UNIVAC Division of Sperry 1:and, Burroughs, Control Data Corp., RCA, IIoneywell, National Cash Register, and General Electric are other principal suppliers. Ot her mann fact livers include: Addressograph-Midi igraph Corp., Advanced Scientific, Instruments, Autonetis. Bunker- Rauh) Corp., Clary, Computer Control Co., I >igital Equipment Corp., Mitten, ITT, Monroe Calculating Machine Co., Philco, Raytheon, and Scien- tific Data Systems, Inc."

IXASING ADP EQUIPM.F.ST Following a practice originally favored by ADP mono fact lifers in t he 1950's, It large percentage of ADP equipinent is leased.Monthly lease rates can be as low as several hundred dollars, but increase sharply with the size of the system. Monthly rentals of from $25,000 to ST5,000 tire not uncommon. Some of the more complex, sophisticated systems Intro monthly rentals of from $80,000 to $100,000. Purchasing prices vary in a corresponding degree, beginning with as low as $25,000 and going as high as several million d.:11ars for one cyst tun .° ADP syst CMS are designed t o operat e on a f hive sli ft per day, round- the-clock basis. For most equipment used in Government one hundred and seventy-six hours per month (S henry a day times 22 working days) is considered one lift. Alt hough leasing agreements vary from manufacturer to manu fact urer, the, user pays for t his basic, shift, time as well as for use of the equipment; in excess thereof.In the last, 2 to 3 years, while Al P lease and purchase prices have been otherwise

5 "Monthly Computer Census," Computers and Automation (April 15(15). p, 56. "U.S. V. IBM (Civil Action 7:2-344. So, 111st, N.Y.). final Judgment entered .lan. 25, 1554; subsequent order 11 tern! Jam 1.1, 1 91i:I. 7 Fortune, op. cut.. p. 11:1, "Niontilly Computer Census." op. ch. '' Apparently all Government lenses urn. With the manufacturers.In lensing to private Industry. the manufaeturers are now experiencing some competition from ADP leasing liras.,wording to Fortune ningazine: '"I'lley [the leasing companies] operate on the premise tint a computer at the right price has a 11)14:14. veolimole 1111 limn is aSsI11111.11ill the Inailllfaelarer'S 11,111111N, 111111211 recover the list price of the machine hi 45 to no month,.The ipasiog vunlimoi,s boy the !INNi lanellilIPS at a (11t4e(iitIlt and rent them to costume-es at nsinissi rates.Largest in the 1044 seems to he Boothe Leasing Corp., a subsidiary of Greyhound Corp.. whose most plopIllar pin itprovides n minimum Hiving of It) percent. Boothe 1101'Snot 11E111to recover Its Investment from its first customer with such a dn], but expects ultimately to thol another home for the machine; and It offers various schemes that encourage the renter to use the computer intensively.The rate for the list :t yours. for example, 11111,r provilh Retie v. lugsIf the machine is used only one shift during the (Illy.Itot It Is cheaper than the manufacturers' rates for two shifts. still cheaper for three shifts.In any event. after the third year the rent goes down steeply.Snell plans, If popular. could upset 1 he loans. try's current price structure, which compels a cortumily to pay just as nmelt rent fur a 0.year-old machine as for the seine model branti.new" (ortantop. cit., p. 207). 15 12 AUTOMATIC DATA PROCESSING EQUIPMENT immune from normal competitive forces, there have been reductions in extra-shift lease rates, and in sonic cases extra shift charges have been eliminated. THIRD OENIMATION ADP The early ADP systems of the 1950's with thousands of elect ronic vacuum tubes requiring extensive air conditioning capacity to keep then] at a satisfactory temperature level were large and cumbersome. These vacuum t ube systems are referred to as "first generation" equipment. In the late MO's, ADP entered the "second generation" when small solid state transistors replaced the vacuum tubes which lessened the need for vast air conditioning cap.wit y to keep the equipment cool. This led to improved construction techniques which, coupled with advancing circuitry design and other improvements in t he "state of the art," resulted in equipment of increasing speed and capacity. Most of the equipment now in use is "second generation." The "third generation" is close at hand. As one leading ADP ex- pert described this coming generation: Huge new machines with fantastic memories and arithmetical capabilities linked to numerous smalls :... satellite machines and serving literally dozens of users simultaneously, are on the horizon at even Iowa cost." 1Vith the arrival of third generation ADP equipment, comnranica- t ions systems will link large, fast, high-capacity (luta processin systems to oltices and laboratories of numerous users. These users, instead of acquiring an ADP system or visiting an ADP service center, will feed problem3 or information to he processed into the cent nil computer system over a communications system. The user would have installed in his dice or laboratory an input-output compment no more conspicuous than commonly used teletype units found in business offices throughout the world.The user 'emit] /either receive an immediate response over this unit, installed in his ollice or laboratory or the information could be accumulated for periodic processing, re- corded on tape or punched cards at t he ADP center, or a. printed response could be ,prepared at the center and mailed or otherwise delivered to him. The technical tine., inomic feasibility of this linkage of ADP with communications has been proved. The ever-increasing complexities of business and Government demand the fuller exploitation of ADP potential in practically every field of human endeavor.The economics of ADP design and manufacture make this third generation approach inevitable.However, second generation, or even earlier equipment, will not become obsolete overnight. Most equipment has an economic useful life which extends far beyond the point of its technical obso- lescence.In a narrow sense, at present almost any ADP system. by the time it is off the drawing boards and in production, is technically obsolete. A determination to change equipment for sonic more advanced system should be based on the need for larger and faster capabilities.All ADP applications will not require the most advanced capabilities thereby justifying the additional expenseparticu- larly if the costs of the older equipment have been fully amortized. to Robinson, Dr, I1erbert W., "The Outlook for the Antonintie Data Precessint; Industry nod the Role of Inc." Remarks before the New York Society of Security Analysts, Nov. 1G, 1004.See hearings on 11.1t. 485, p.210. t AUTOMATIC DATA PROCEa.U'tG EQUIPMENT 13 Thus, the advent of more advanced systems with greater speed and capacity will not abruptly diminish the economic value of present ADP. A gradual change, however, is inevitable. Larger computers are more efficient per unit of work, They process information faster and have larger processing capacitiesbut they cost more.So, to obtain the efficiency inherent in these larger new computers, they must be kept busy.As a result, fewer units of Government (or business or industry) will have sufficient requirements for processing capacity to justify sole utilization of individual systems. The potentials of the larger computers now in the oiling which can be integrated with communications is so great that full utilization of one system's maximum capability is sufficient to fit, the needs of scores of potential users.And, the of the maxis mm potential of a third generation system under conditions of optimum efficiency can result in a phenomenal reduction in ADP costs to individual users. This greater potential and lower cost cannot be ignored by either business or Government. As third generation time-sharing increases, the traditional agency- by-agency structure of the Government in terms of ADP management, will become less apparent and less important.Systems design will depend more upon the functional requirements of the users than their identity or jurisdiction.The need for Government-wide evaluations as to acquisition and utilization of equipment will become so pro- nounced as to make any narrower approach prohibitive.The waste inherent in unused potential and errors in application or equipment selection will be staggering. B. Crannr GovErix3rnyr ADP AE. NAGEMFXT TECIINIQINS At this time, ADP has many varied applications in the Federal Government. As classified by the Bureau of the Budget," present applications fall into the following general categories: material, facilities, financial, personnel, :nal natural resources management; operations; operations control and support: scientific; and en omeerinm, For the most part, the Government ADP listed in the nontechnical categories is used to perform cumbersome, routine administrative tasks involving large volumes of data. Without considering any classified applications ini defense and security agencies, comparat ively little Gov- ernment ADP is part of advanced management systems directly invol ved in the dec ismninaking process. During the 1950's, existing manafrement, policies applicable to calculators, punched card, and other ace equipment were extended to ADP. BOB concern over ADP management was usually limited to the annual agencywide budget review processes. BOB policy responsibility for department and agency management falls within two distinct though closely related areas.First, under the Budget and Accounting Act of 1921, as amended," and the Budget and Accounting Procedures Act of 1950, as amended," the B011 is authorized to ".* * assemble, correlate, revise. reduce, or increase the requests for appropriations of the several departments or establish- ments."In other words, the Bureau of the Budget maintains the power of the "purse strings;" and, collaterally, has responsibilities to 111964 Inventory or Automatic Datn Processing (ADP) Etuipmenv In the federal Gov- ernment, Bureau of the Midget, July 1964. "42 Stat. 20 : 31 U.S.C. 1. 23 64 Stat. 532: 31 U.S.C. 1. D. Rept. 802, S9-1---3 17 14 AUTOMATIC DATA PROCESSING EQUIPMENT investigate, coordinate2 and improve the management of the various departments and agencies.

AntmANAotnir.N.r s.ruoY 1n 11011 I95s In 1938, BOB took note of the many specific problems inherent in .VDP management.In ;September of that year :in "A DP Respon- sibilities St tidy" %vas Iwgint, to be couplet ed iir.honethe following yea r. The findings and recommendations in this 1939 BOP, A1)13 study. portions of NvItich are quoted throughout this report." const:d a realistic evaluation of %vliat %vas wrong %vith Government Al P management at that time and what had to be done. The st tidy recognized the need for specialized management of ADI', for Government-wide coor(linat ion, and the fundamental importance of accurate, up-to-date information for all levels of management."I)ynattlie leadership.. in Government ADP management was foundto be a "vitalnecessity.- And, as long ago as 1939, thisBOB studyconcluded that -passive, partial or informal types of leadershiphavehad their place but have now outworn their usefulness."15 Unfortunately, the concept of "dynamic leadership" envisaged in this early report never came about. To a significant degree, the recommendations in this 1959 study were to be repeated in a subsequent study BOB undertook almost 6 years later."'rule principal "For the complete text of the "Report of Findings and Recommendations Resulting from the Automatic Data Processing (ADP) Responsibilities Study, September 1958 to June 1959 (conducted under the direction of the Bureau of the Budget)" SO! lienrings on 17.R. 4845. p. 567. le 1959 BOB ADP study, p. 20. "The 1959 11011 !Andy contempInted that BOB would undertake the following: 'The Bureau (li the Budget with the novice nnd nssilitnnee of agencies will nmert hroao. general leadership nnd coorditintion of the AIM' program in the executive hranch.This will involve Government-wide responsibility for the following : "(11 Using estnhlished lines of communication, existing orgnniintionnl rein tionships nnil its membership on the Policy Committee for the Joint Accounting improvement Program and other such groups to insure effective internal and Government-wide coordinntion of the ADP program with reinted programs nail nctivities. "(21 Formulnting and proninignting policy, criteria, and planning guidance for the ADP progrnm of the Government. "(3) Plnnning and coordinating the implementation of Government-wide ADP orienta- tion and training. "(4) FIstnhlishing Government -wide formulnm for costing ADP applientions and review. Mg 111111 analyzing smuninry cost data in terms of dollnrs and of manpower utilization. "ffil Fostering. promoting, and coordinating the interngency shnring of ADP equipment. "(6) Developing specific plans for an experimental computer service center mid. if deemed feasible. taking nction to assure the erention mid operntion of the fume. "(7) Coordinating ADP resenrch and development progrnmH of the Government. "(8) Providing lendership In a Government-wide effort to nlievinte the prohlems of in- compatibility of ADP equiptnent. "191 Fostering nnd promoting studies which will lend to minimizing the villnernhility of App equipment to snlootnee, enemy nttack, or nnturnl disaster. "(10) Opernting n Government -wide ADP Information Exclinnge. "(11) Sponsoring the continuation of the Interagency Committee on ADP and nssuring Its effective utilization. "(12) Reviewing nnd nssessing progress of ADP programs in selected agencies and for the Government nR n whole. "(13) Fostering and promoting desirnhie stntidnrdIzntion in ADP systems which nre common to all agencies. "(14) Using existing information sources and ohtnining slug' ndditIonsl summnry Infor =Hon as may be ewential to Gm eaective performnnce of the responsibilities assigned" (1050 DOD ADP study, p. 4 bearings on 11.R, 9845, p. 574). The 1965 BOB stiffly enntnIned the following recommendations relar.to the BOB:

ClIAPTEIt1 "In the development and nppliention policies, guidelines, and criteria, the Bureau of the Budget Will use rt elassIfIcntinn system which recognizes the essentinl differences among computer 111StalliltiOnli.The Wien) of cinssifiention suggested by the n11813.818 mode dor lug this study will serve n8 the builn for developing this system."

CITAPTEll 2 "1. The Boren of tio Budget will develop n hrondly linsed program of continuous firm of computer systems. to provide nn nesessment of nccomplisbnients 111111 to serve nR recurring source o: informntion for the development nr revision of policies and guidelines.

v.t1111/4 AUTOMATIC DATA PUOCESSING EQUIPMENT 15 reason why the management concepts in the 1959 BOB study were not fully implemented was the need for legislation. The study reeog-

The responsibility for conducting evaluations and preparing appropriate reports will rest with the agency heads, in accordance with their normal management responsibilities. "2. The Bureau of the Budget will develop criteria to assist in evaluating both systems design and various aspects of system performance."

OKAPTICI3 "1. The Bureau of the Bridget will establish aninteragencygroup to study and develop costprinciplestobe applied uniformly by agencies in establishing prices for shared computer lime and services. "2. The Bureau of the Budget will conti'Aue its evaluation of the service center concept to determine a proper course of action to be taken. "3. The Bureau of the Budget will, with the assistnnee of the major agencies concerned, andertnke a study of the problems associated with the use of contractor organizations for providing services related to electronic data processing activities, with a view toward developing policies, guidelines, or actions that the study may indicate are needed." Clutrrktt 4 "1. The Bureau of the Budget will provide for the publication of criteria, guidelines, or regulations covering tlin selection of elietronle data proem-ring equipment.It will do this through new Issuances or by expanding upon current issuances, covering the following suhjects: "n. The preparation of system specifications, including benchrunrk problems, to he furnished equipment suppliers in requestu for proposals. "b. Evaluation of suppliers' proposals. "e. Compatibility considerations. "ti, Consideration of excess and surplus equipureut. "e. Distinctions to be made between additions, replacements, and modifications when selection policies and criteria are applied. "f. Interagency sharing of experiences In the selection and performance of equipment." ClIAPTIat "1. 'rho Bureau of the Budget will 118811111P overall leadership of an executive henna program for the standardization of automatic data processing equipment and techniques for Its use.In the fulfillment of this responsihility the 'Inman will : "a. Establish standardization policies and objectives. "b. linnire that the American Standards Association program for the development of voluntary American standards for indolent tie firth processing equipment and techniques receives more adequate support by the Federal Government. "e. Provide for appropriate Government use of American AIM' standards approved by the American Standnrds Assoe.Intios, when it is in the best Interests of the Governmenr and the Nation to take this action. "d. Provide for the approval and Implementation of Federal ADP standards in those instances In which the needs of the Dovernment would not be served by udoption of voluntary American standards npproved by the American Standards Association, or interim standards are needed pending adoption of an American standard." "3. The Bureau of the Budget will assume overall leadership of a program for the standardization of data elements in common use in the Government and the codes used to represent those elements.In the fulfillment of this responsibility tbe Bureau will : "a. Invite agencies to submit information and recommendations concerning data elements in common use that should be considered for standardie.ation. "b. Assign responsibility for the studies necessary to establish the feasibility of stand- /left:titian of data elements and codes. "c. Make provision for the approval and Implementation of standard data elements and codes, the use of which involves two or nature agencies. "d. Make provision for the revision of standard dm elements and codes wbeu circumstances justify this action." ClIAPTETI 9 "1. The Bureau of tire Budget will revise Its current policies to provide that (a) established criteria with respect to the purchase or rental of automatic data processing equipment shall he applied in determining costs to be reimbursed under cost-reimbursement type contracts, and (b) agencies will Include equipment operated by their cost-reimbursement type contractors In Intra-agency sharing arrangements, "2. The Bureau of the Budget. In cooperation with the Department of Defence, National Aeronautics and Space Administration, Atomic Energy Commission, General Services Administration, and other agencies will undertake tbe development of reporting procedures 'o obtain an inventory, together with related data on costs, of automatic data processing equipment and services provided under coat - reimbursement type contracts. This information should he incorporated in the ADP management information system recommeeded in .7bapter 10." ClIAVTICR 10 "'I'lli! Bureau of the Bridget will undertake the development of n broadly based ADP management Information system as a matter of high priority, and will seek the advice and assistanen of those agencies most vitally concerned, Including agencies with Government- wide responsibilities, suchasthe General Services Administration and the Civil Service Conanission." et 18 16 AUTOMATIC DATA PROCESSING EQUIPMENT nized, but did not emphasize, the possibility that legislation might be necessary.Those making the study were perhaps unrealistically optimisti,; in believing that a program of the magnitude they envisaged involving all agencies of Government and billions in tax funds could be brought about without statutory definition of the "clear delineation of responsibilities and [the] organization phut" they considered essential. The 1959 BOB ADP study was strong and clear as to what had to be done, but relatively weak and ineffective as to how to do it. BOB 1EANAGEMENT GUIDELINES BOB has issued Al)P management "gaidelines."In March 1960, BOB issued Bulletin 60-6 entitled "On idelines for Studies To Precede the Acquisition of Automatic Data Processing Equipment." 17These guidelines generally conformed to t he contents of a letter the Comp- troller General had addressed to the. various executive, departments and agencies in September 1957.This information concerning the need for and the nature of Al)P feasibility studies was undoubtedly of value to the various agencies.But, Bulletin 60-6 made it. clear th at the guidelines were mulvisory and t lint. there was no 111111i mil lent that agencies contemplating the, acquisition of APP follow this recommended evaluation procedure. Some 18 months later, in October 1961, the BOB issued Circular A -5 -1 outlining "Policies on Selection and Acquisition of Automatic Data Processing (ADP) Equipment." " The principal factors discussed in this circular were 1. The desirability of select ing on the basis of exact system specilicat ions. That equal opportunity and appropriate consideration should be afforded all manufacturers who offer equipment capable of meeting systems specifications. 3, That two primary factors should lie considered in the selection of equipment: (a) its capability to fulfill system speciliva- tins, and (b) its overall costs. . The need for effective lease versus purchase evaluations. On lfarch 14, 1962, the BOB directed agencies to furnish annual reports on their Al)P inventories as well as limited information as to ADP utilization.In August 1963, BOB published Circular A-61, essentially a more comprehensive statement ofI he Bureau's ADP management guidelines and consisting substantially of the earlier gu i del hies referred to above." Subsequently, BOB has issued other circulars relating to ADP concerning matters other than management policythe. establishment of an experimental sharing exchange and computer service center (Bul- letin 64-9, Jan. 2, 196.0,2" and an ADP sharing program (Circular A-97, june 15, 1964) under the responsibility of the Administrator of General Services." Also, in February 1965, the BOB submitted a "Report to the Presi- dent on the Management of Automatic Data Processing in the Federal

" All BOB circulars, bulletins. and ether directives relating to ADP are set forth in app. B of the hearings on 11.11 4845, p. 270. 1"Ihld.,p. 28n. 10MK. p. 292. 20ibid., p. 347. lbld., p. 350. AUTOMATIC DATA PI? OCESSING EQUIP:NIENT 17 Government," 22 surveying some of the more serious A.DP management problems and containing a series of recommendations to deal with them. On March 6,1965, BOB issued Circular .A.--11 implementing these reconnnendat ions and delineating the responsibilitk-s for ADP management as between the BOB, the GSA, and the National Bureau of Standards.23

I NE FFECTIV ENESS OF GUIDELINES Since 19i8, up to the time of the hearings on H.R. 4W, the GAO issued approximately 100 audit reports to agencies, congressional Nem in (Ts, a ml to Congress revealing serious shortcomings in the manner in which specific agencies acquired and/or utilized ADP equipment .24The major deficiencies cited in these reports have been : (a) Inadequate feasibility studies. (1') Uneconomical and ineffective equipment (c) Overpayments resulting from inadequate management practices. (d) Uneconomical procurement of equipment. Excluding the :29 reports dealing with inefficiencies in the manner in which ADP equipment has been acquired by certain Government contractors, most of the deficiencies outlined in this series of reports constituted violations of BOB guidelines, or otherwise demonstrated the need for a 'Ilona effective management system based upon a broader (h coordinated approach.These reports. aimed specifically at the independent operations of individual user agencies, have demonstrated that guidelines of an advisory nature and without provisions for effective review or "feedback" of information as to agencies' compliance or the need for policy changes do not meet the Government's ADP management needs. C. Tun NEED von GoviltxmENT-1\runi.: CoonnixATrox ix ADP 'SLtNAGEMi

COMM NATION FU N DAM ENTA T. To GOOD MA NA GEMENT There are countless examples of the benefits of .coordinat ionin business and Government.111 recent years, for example, the Secret ary of Defense has achieved significant improvements in operations and large savings in tax funds by consolidating the manage) lent of defense logistics and other defense support functions. On Jamtary 29, 1962, in hearings before the 'rouse Subcommittee on Defense Appropria- tions, SecretaryMcNamarasaid : One of the most. productive fields for the economic appli- cat ion of centralized management is in the provision of common supplies and related services to all the military departments. After a ratei.. comprehensive study of this entire problem, we came to the conclusion that considerable economy and efli- ""Iteport to the President on ilte Management of Automatic Data Processing in the rederni Government," prepared by the Unreal( of the Budget (March 1905): this report has beer printed as S. Doe. 15, Mit Cong., 1st sess.; subsequent page references In this report will be to the Splint e olocument, "Ilearlogs on p. 21 In al)11. It of the hearings on ILL 4S45 Is a summary of the most significant of these reports.

.1S IS AUTOMATIC DATA PlIOCEht:ANG EQUIPMENT ciency could be gained, if all common supply management activities were consolidated in a single ageney.25 This philosophy has been applied to a number of functions in the Defense Department, including 'intelligence, communications, and, under the Defense Supply Agency., the coordination among the services of approximately $3 billion of industrial-type production equipment which the Government, owns and furnishes defense contractors for use in Government work. On March 28,1963, in hearings before t lie Joint Economic Commit - tee, the Secretary pointed out that the concept of consolidated man- iv/eine-a need not be limited to the Defense Department : The basic principle that there should be a single agency to procure and manage common items of supply or services for all users is, as this committee has repeatedly pointed out, us valid for the Government as a whole as it is for I he Depart- ment of Defense. Therefore, in our own efforts to obtain greater efficiency through the eonsolidati on of common logistics support activities, we should not restrict ourselves to Defense agencies alone.Whenever we find thatit.is more economical to use the capabilities or facilities of other Gov- ernment agencies, with no loss in military effectiveness, and at the same or less cost, we should not. aril have not hesitated to do so." General purpose ADP is a "common item" throughout the Federal Goveriunent. While the coordinated Government-wide manage went system .provided in 1111. 48-15 may not provide the same degree of (Tin cal !zed management. of ADP as the Secretary has applied in t lac various defense support areas referred to above, the same principles apply.For this reason, there is no legitimate reason why the Govern- ment should not obtain the benefits inherent in a Government-wide coordinated approach to ADP management. 00V Eit NM ENT-W I DE COODI NATION IlECOMMENDul 1W G.M1 IN 1958 Concern over our present disjointed agency-by-agency approach to ADP management is no recent. development. On dime 27, 1958, the Comptroller General issued the first of four comprehensive GOVP1'11- men t-wide ADP management reports."This early report outlined the tremendous potential of ADP but stressed concern over echo in trends in ADP acquisition and use which he believed would inevitably lead to costly inefficiencies.Concern was expressed over the inlet ice of subst it sting ADP for less sophisticated equipment rather than integral ing ADP into agency procedures and functions on a systemat ic basis. lint, most important, this report pointed out that, there was no single agency of the Government responsible for directing and coordinating continuing developments in this field.Accordingly, the rei ot. stressed as a principal recommendation the need to establish an ellecl k-e coordinated ADP program of joint effort by the various user agencies in Government.

25 Testimony of Secretary of Defense McNamara, House Sulwommittec on Defense Appro- priations. Jan. 29, 1952. p. 153; reprinted In hearings on HAL 4845. p. 205. v6 Statement of Secretary of Defense MeNamara, hearing before the Joint Economic Committee, 3Inr. 28.196:3. p. 20; reprinted In hearings on 11.11. 4845, p. 200. 11 "Summary of Progress and Trend of Development and Use of Automatic Data Processing In Business and Management Control Systems of the Federal Government as of December 1957." Comptroller General of the United States (June 1958), GAO tile No. 1i-111E109. 21 AUTOMATIC DATA PROCESSING EQUIPMENT 19

CDNIPTIl01,1,Elt GENEDAL DECO11MEND,AT1ONS IN 1010 AND litalt On December 30, 1960, the GAO issued a second Government-wide audit report."_`:side from urging greater ADP ut ilizationin certain defense functions readily adaptable to ADP, this report again empha- sizedt he need for Government-wide coordination in ADP management.The report; endorsed the 1959 BOB ADP study but again called at tent ion to the lack of positive central planning of a long-range unitive within the executive branch to promote the maximum degree of efficiency, economy, and effectiveness in ADP use. On March 6, 1963, it third Government-wide audit report was issued.2°In this report, the GAO demonstrated that very substantial sunis could he saved if the Federal Government purchased a larger percent age of its A DP equipment. The report contained detailed lelse, versus purchase cost comparisons of 16 different widely used ADP systems.Applying- these comparisons to 52:3 of the approximately 1.00 systems then installed or on order as of June 30, 1963, the GAO estimated potential savings of about $14S million over a 5-year period with savings of approximately $100 million a year thereafter through the selective purchase of certain of the components of certain systems. In this report, the GAO, cognizant, of the extent. BOB had been able to implement t he recommendations contained in the. 1959 BOB ADP study. stressed that. "-We are aware of no significant progress toward an effective coordinating median ism in the Federal Govern- ment, for achieving the interrelated objectives cited"; 3° that, is, ellic ient, businesslike, Government-wide coordinated ADP management. The report, warned that to fully realize savings of this magnitude, that a basic change from an agency-by-agency approach to a Government - wide coordinated management :4ystem must be made.As an example, decisions as to the advantages of lease versus purchase should be made from the standpoint of the Government as a whole, and not primarily from the standpoint of the potential use of the system to the initial using agency.The report also indicated the low ebb in Government ADP utilization. ADP systems are designed (technically and economically) to operate three shifts a day but at that time average Federal usage was little more than one shift a day. The report, concluded by reasserting the recommendation of some 5 years' standing that there be Government-wide coordinat ion in ADP management. ItEPOIZT BY GAO IN I no.1 On April 80.196.1. thefourth and most recent 'comprehensive Government-wide ADP report was submitted to Congress." This report updated (1-m-eminent management developments for the year rollowing the issuance of the March 1963 report discussed above.'Flip GAO noted limited improvements but warned that optimum efficiency and. effectiveness would not. be achieved without Government-wide coordination. 1)nring this period, this committee had recommended

L.' "Review of Automatic Data Processing Developments in the Federal Government." by the Comptroller Denemtl of the United States (December 1060), GAO file No, 11-111:369. "~tidy of Financial Advantages of Purchasing Over Lensing of Electronic Data Processing Equipment In the Federal Government," by the Comptroller General of the Unit" l States (March 1063), GAO file No. B-115369. hi Ibid., p, al "Review of Problems Relating to Management and Administration of Electronic Data Processing Syhtems In the Federal Government," by the Comptroller General of the United States (April 1984), GAO file No, B-1115369,

ra2 20 AUTONIATIC DATA PROCESSING EQUIPAIENT and the House had approved ILE. 5111,'r2 the forerunner of this leg - islation. to provide for coordi n at ion in Government ADP management. Although this legislation was not acted upon by the Senate, there was a significant reaction to the bill in the executive branch of the Govern- ment.And in. the April 1964 report the Comptroller General was able to point to limited improvements in certain aspects of Govern- ment ADP management. But he cautioned that the advances that, were possible under the present agency-by-agency approach were limited, and again he emphasized t he need for Government-wide coordination and warned that in the absence of a Government-wide approach to ADP management, au opt it degree of efficiency awl yew tomy could not be achieved. 1). EFFECTIVEGOVERNMENT-WIDElfAxAcioir.sT Al)! Pnoviim) ay 11.11. 484r) RESPONSIBILITIES 01' BOIL OSA, ANDnil: nErmultExT01 COIDIEDCB To achieve a businesslike Government-wide coordinated management effort, it is necessary that additional authority he given to BOB. GSA, and t he Dept 11 mut of Commerce. In (lie 1951) BOB st tidy. the future course of Government ADP management was discussed as follows: At this point in time [1959] we in the Government. ha ve entered that stage of the ADP era which may be classified as super reflection. We have now isolated and identified the major problems. whieh need attention, as succeeding sections of this report will demonstrate, There are some unanswered qnestions as to exactly where we st and in a Govern!) len t-w i de sense, but we soon will find the needed answers. We are not exactly sure as to win t. the flame holds, but we soon will have. mapped a desirable course to follow.For these things we need a clear delineation of responsibilities and an organization plan.33 The hopes expressed in the I3013's 1959 ADP study have not been fulfilled, and it is evident, that Congress must provide a clearer delineation of responsibilities and a more definite organ izat ional plan if the Government is to have maximum ethic iency in ADP management. Aga in, as in 1959, the Government is about. t o enter int 0 a more sophisticated stage of ADP usage.With third generation equipment and ensuing developments will come broader ADP utilization and vastly increased Federal ADP expenditures. Thus, aside from the current problems, more effective techniques must be devised for t ho management of ADP equipment if in the future we are to avoid even more costly errors which otherwise will accompany Government ADP usage into this newer generation. Although II.P. 4S45 provides for fundamental changes in Govern- ment ADP management, the bill in many respects is very limitediii scope. In essence. the bill would improve the operational machinery available to the Government making it, possible for those agencies which currently have APP management responsibilities to do a bet ter job. In many respects, this legislation provides the delineation of mil. Rept. 428, 88th Cong., 181 sfifoL. approved House of Representatives, July IS, l96:3. 3319515 Bureau of the Budget ADP study, p.4; hearings on 11.11, 4845, p. 574, OTIVIVOIEW VIVO ONISSHOOILI INSIVdrilbH Ig

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is "mu t.t !L stJulaitati uo 'um 'asp ti L4 r '11 '1101410n 6ti 22 AUTOMATIC DATA PROCESSING EQUIPMENT In addition to the fiscal and policy control of the BOB, the hill expressly limits GSA's authority.Agencies Ivould maintain their present independence in the determination of .DP requirements. Agencies would be free .from any interference. front GSA as to the manner in which .ADP equipment is used.They wind(' be advised of all signitivant. decisions affecting their ADP operations and would have the right to appeal to BOB.The hill limits GSA's authority to -operate" ADP (other than its own in-house equipment )tinder this management program 0 those hist ances where multiple rgency usage or equipment, is involve(!. TECHNICAL SVEN= 01."EllE NATIONALItrIt.17or STANDARDS The leelitiiral aspects of this coordinated management program !v- illain with the National Bureau of Standards in the Department of Commerce. Again, t his delegation is in accorda nee with t he t radit ional responsibilities of the agency. The Bureau of Standards has done considerable ADP research in the past. and has made. many contribu- tions to the "state of the art." The Bureau of Standards would offer technical support to the BOB and GSA and Ivonld also act. in an ad- visors' capacity to the. various agencies and other users when requested. Aside from these routine responsibilities, the Bureau of Standards would undertake whatever research and development is necessary to the interests of the Government, supplementing similar efforts under- way in various user agencies. Among the more serious problems confronting the Government in ADP utilization is the lack of compatibility in equipment..Standard- ization has been a, problem in Government almost from the time this equipment, was introduced.For the past, several years, various user agencies, the Bureau of the Budget, and this and other committees have been concerned over the lack of compatibility in equipment, which has seriously compromised the Government's overall ADP potential. This problem was discussed in an earlier report of this committee in 1963:35in conjunction with the activities of the Bureau of Standards. At that time, it. was recognized that, to a large degree, progress in the standardization of equipment. must. come from ADP manufacturers. The manufacturers have the technical know-how to evaluate the alternatives and they would desk!' and build the equipment. It has also been recognized, however, that the Government's domi- nant, role as the world's largest. ADP user requires that there be a continuous source of Government, interest, and concern in the achievement. of greater standardization. Under H.R. 4845, the National Bureau of Standards is expressly extended the responsibility for representing the Government. in this standardization effort. and submitting to the Presi- dent, any recommendations for further Government, action as may he necessary. It, is not. the intent, of this legislation to authorize the Bureau to structure a broad research and development program without regard to the work of the various other agencies or in a futile effort, to over- take the research and development. capacity of the industry. The authc "ity in this legislation is aimed at, supplementing the Govern- ment research effort, in coordination with other Federal agencies and monitoring developments in the industry for the specific purposes provided in the legislation.

t6H. Rept. 956, 88th Cong., 1st seas. (1963). ouvivolav vIa na oxiss3o0 J,Nispanaba Eg

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F. H.R. 4845 WOULD PROVIDE von MORE ECONOMIC ADP ACQUISITION

STRENGTIIENING OP GOVERNMENT'S BARGAINING POSITION The Government is the largest ADP user in the world. Through lease and purchase contracts, billions in tax funds are invested annually.Yet, as the 1965 BOB study points out, "The Government obtains no special advantages as a volume purchaser of equipment." 4' The smallest company, with the most limited ADP requirements, can acquire the various commercial general purpose ADP systems at prices comparable to those paid by the Government. Though volume acquisitions should inherently place the Government in a stronger bargaining position and lead to volume discounts, as a matter of practice under the present disjointed agency-by-agency system of Government ADP management, the Government has hardly any bargaining position at all. Over the years agencies have acquired commercial, general purpose ADP at prices listed on GSA supply schedules. As in the case of many other supplies the Government, requires, GSA enters into neon- tiations with various ADP manufacturers and agrees upon prices Hearings on A.R. 4845. p. :150. -1059 Bureau of the Budget ADP study, op. eft.. p. 20: bearings on MR. 4845. p. 599. 41 19135 BOB ADP study, p. 41. AUTOMATIC DATA PROCESSING EQUIPMENT 27 for the equipment they have to offer to be applied to Government leases and purchases during the coming- fiscal year.Upon completion of these negotiations, price schedules for the different manufacturers are distributed to the various agencies and, generally, the, equipment. I hey need is acquired at I he prices listed on the schedules. Manufac- turers have occasionally offered an agency lower prices on particular procurements than are listed on the GSA schedules.Lt these instances, the manufacturer files an amendment to his GSA schedule price and the lower price is applicable to all Government acquisit ions of t hat equipment for the remainder of I he fiscal year. GSA has been able to obtain sonic concessions from manufaeturers on lease prices and conditions, particularly second and third shift use rates. Other- wise, the GSA schedules generally reflect I he manufacturers' list. prices. Under this procedure, price determination and procurement are divorced.The various manufacturers have no guarantee that the Gov- ernment will lease or purchase any particular volume of their equipment.As a result, some manufact urers' representatives characterize the GSA price schedule as simply a "hunting license."Agreement to a schedule of prices with GSA permits them to embark upon the more formidable task of hunting for agencies in the Government desirous of leasingOA'purchasing their equipment.Under these rcinnst a Dees, it is somewhat understandable why manufacturers have generally responded with hremarkable degree of disinterest in price eill I ing in GSA cont Pact, price schedule negotiations. GSA. with no alternate course of action, has been forced to extend price negotial ions in many instances well beyond the beginning of Ilse fiscal year t o which the schedules apply in an effort to obtain better terms and conditions.These delays in themselves have caused administrat i ve problems.

V111.1311: DISCOUNTS 11:031 N111,1131: 1.110CU1{E3tENT To obtain volume discounts, t he Government must have volume procurement.The -open end" supply cont ract simply is not the most suitable arrangement. for ADP procurement.The basic. problem is that this form of contract procedure. does not. afford the Government any ad rant age corresponding to the volume of equipment leased or purchased.A specialized approach to Government ADP procurement is needed.As (he 19;onosl tidy suggests: It is most unusual to promulgate Government-wide policies on specific equipments. Irowever, as I lie (leneral Accounting Office has already recognized, the use of A-DP equipment has now demonstrated tlmat its impact is such as to warrent specialized attention. 42 The 19fl; BOB study recognizes this problem but oilers an inadequate solid ion.Under the BOB approach? negotiation deadlines would be established and manufacturers failing to agree to terms would he precluded front Government procurement activities.Al- though the 1965 BOB study offers this deadline concept as a principal solution, the study also recognizes its limitations. As an example, in the report. it. is stated : On both sides, maneuverability is curtailed if an impasse [in negotiations] is reached. The Government is faced with

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C1 coot aoa saav 'seme 'd AUTOMATIC DATA PROCESSING EQUIPMENT 29 The reason is that the price covers more than just the equipment, itself: it includes the provision of all support ing services, such as computer programs, compilers, special - purpose routines, and specialized training and systems aidsall of which vary and tend to be custom-tailored for each installit- t ion.Because. of these variances, the costs incurred by the manufacturer to support each installation are substantially I he seine and are not reduced by virtue of many installations." These "custom-tailored" items referred to by BOB relate to "software" and not the mass-produced, general purpose "hardware" components making up these specially designed ADP systems.As pointed out earlier in this report, these mass-produced components can be arranged in varying combinations to meet the particular application of the user.Inherently, all commercially available, general purpose ADP systems except those of the most unique application have a basic capability which can be applied to many uses in agencies throughout the Government. And, even when a system has been designed to meet a particular narrow application, additional components can be easily added to broaden its use. Changes of this kind are considered routine. Under this legislation, GSA is not charged with either the selection or the use of equipment. The agencies would determine their individual requirements and use the equipment, as they see fit.GSA would be furnished a shopping list of commercially available general purpose A DP system eomponents.Once other aspects of this coordinating system have been fully implemented so that adequate information is available, GSA could coordinate ADP acquisition and schedule as largo a volume of acquisitions as agency requirements permit. To the agency, the system may be complex, specially designed and tailor made o till some particular application critical to its operations.But, to GSA. as far us hardware procurement, is concerned, these complex, highly specialized systems would only be a list of mass-produced, com- ercially available general purpose components. Although software procurement would present a more complex problem, there is no reason that these complexities should interfere with the establishment of a single purchaser concept as provided in 484:i.Software procurement offers great potential for savings. TJuder this coordinated Governmentwide ADP management program, lovernment expenditures for these goods and services would be closely defined.Once properly identified, there could be more effective management, of software procurement either directly by the agencies or by GSA. in conjunction with hardware acquisition.There is no reason why Government software acquisition cannot be subjected to more systematic and orderly procurement procedures.There is also greater potential competition m software procurement, since software does not necessarily have to be furnished by the manufacturer of the equipment. rsn DEVOLVING FUND PROVIDED IN MR. 4845 TO OBTAIN VOLUME ACQUISITIONS The revolving fund concept, provided in H.R. 4845, as discussed above. is needed to provide the Government with an accurate, up-to- date flow of fiscal information and to facilitate optimum ADP util- " ibla.. p. 44. II. Rept. 802. 89-1-5 . 32 30 AUTOMATIC DATA PROCESSING EQUIPMENT it ion through sharing and joint use of equipment.But, the most compelling need for the revolving fund is in establishing, the single purchaser concept in Government ADP acquisition. Under this arrangement, GSA would have all of the Government's general purpose ADP acquisition money in its pocket and would be in a position, once all aspects of the coordinating program have been fully implemented so that, adequate information of prospective Gov- ernment agency requirements is available, to offer ADP mann fact urers firm cinitacts for specific amounts of ADP equipment.In turn. GSA could reasonably expect. to receive some reduction in purchase and lease prices reflecting the magnitude of the Government's acquisition. The revolving fund established under h1.P. 4845 would be primed with capital appropriated directly by Congress and augmented by the unamortized value of the general purpose equipment now in Govern- ment agencies which the Government, has purchased. GSA would use these funds to acquire by lease or purchase the ADP needed to fulfill (he requirements of the various agencies. Essentially, all Federal agencies would lease equipment from the GSA. revolving fund. So far as the agencies are concerned, only the budgetary personnel would know the difference.GSA. would acquire the ADP systems selected by the management of the agencies. The agencies would use the equipment as long as they wished, in any manner they saw lit, subject to the general policy and fiscal control of the Bureau of the Budget, the President, and the Congress as normally applied to all agency operations. In practice, GSA. would bill the agencies periodically at rates reflecting the use value of the equipment with the aim that the fund break even at the end of each fiscal year. The agencies in turn would ()Want annual appropriationsto reimburse (lie revolving .fund for the use of the equpient selected byand assignedto them.GSA could obtain direct appropriations covering all overhead expenses incident, to operating the revolving fund, except. that direct expenses incurred in operating multiageney centers would be prorated among the user agencies in their reimbursements. This is a matter, however, which the committee leaves to the discretion of the Appropriations Com- mittees.

OTHER ADVANT.WES PROVIDED EV VoUME PROCIMEM ENT Aside from the establishment of a single purchaser concept :Inc] snupli fyingthe interagency Transfer ofequipment. thecoordination of equipment has 0 number of otheradvantages. two of which are of particular importance.First, this approach would provide all effec- t ive means for making essential lease versus purchase,evn luat ionson the basis of the benefit to the Government as a whole.Second, consolidated acquisition would allow the Government to purchase on a priority basis those ADP systems with the greatest purchaseadvantage.

LEASE VERSUS PURCHASE EVALUATIONS ON A GOVERNMENT-WIDE BASIS UNDER H.R. .1 Sa 5 4845 would provide an effective means for making essential "lease versus purchase" evaluations on the basis of the benefit to the Government as a whole. BOB Circular A-54" issued in October " Hearings on H.R. 4845, p, 286. AUTOMATIC DATA PROCESSING EQUIPMENT 31 1961, provided that agencies should make ADP lease versus purchase evaluations in anticipation of equipment acquisition.The March' 1063 GAO report recommended that lease versus purchase evaluations be made from the standpoint of the estimated useful life of the equipment to the Government as a whole rather than the estimated period of application of the initial user agency. This estimate of economic useful life is nn essential element in the lease versus purchase evaluation.Generally, it is the comparison of the projected lease payments over the period of useful life as com- pared with the purchase price and maintenance costs (less the equipment's residual value) that determines the comparative advantages of these two modes of acquisition.. When the lease payments over the period of the estimated useful life exceed the purchase price and maintenance costs, this concept of evaluation indicates purchase is the most economical approach. The shorter the estimated period of useful life, the more likely the evaluation will favor the lease of equipment. Ideally, competitive forces should push lease rates toward the cost of ownership (purchase price plus maintenance plus interest on capital investment) over the equipment's useful life.But conditions in the ADP industry are far from ideal.At present, the lease payments for most ADP components equal the cost of ownership in a relatively short period, seldom exceeding 45 to 50 months," although the usefal life of most ADP equipment is estimated at between 5 and 10 years.47In a. recent study, the Department of Defense estimated that the lease payments on most ADP equipment equal the purchase price within 2i1 to -11/, years." Whatever the reasons may be and any justification that can be attached to them, ADP manufacturers in the case of most components are accelerating the amortization of the capital invested in leased equipment to the serious economic dis- advantage of those leasing it for any extended period. As a result, at this time agencies and others users leasing equipment pay out in a relatively short period in the form of lease payments an amount equivalent to a substantial portion of the purchase price.Thus, even in those instances where the initial acquiring agency does not foresee an estimated period of application of a duration sufficient for the projected lease payments to equal the purchase price, the Government should nevertheless evaluate the potential savings inherent in purchase. The additional investment in many cases would be a relatively minor portion of the purchase price.Weighed against the additional investment would be use of the equipment with only maintenance costs for the remainder of its useful life. The GAO logically suggests that the estimated period of equipment application by the initial acquiring agency may not constitute a realistic estimate as to the economic useful life of the equipment to the Government as a whole. The Government has countless needs for ADP equipment of varying degrees of sophistication.Some of the most costly ADP with the greatest capacity and speed is used in defense, space, and intelligence.In these areas, there is a continuing need for the most advanced equipment. Yet throughout the Gov-

44 Fortune, op. cit., p. 207. 4, Financial Advantage of Purchasing Over Leasing, Comptroller General (March 1903), p. 15. " Contract Support Service Project, Department of Defense, Project Star Report (Mar, 31, 1965), p. 79. 32 AUTOMATIC DATA PROCESSING EQUIPMENT eminent there are other agencies with less demanding requirements that can use this equipment on a secondary basis. Under these circumstances, it is wholly unrealistic for various agencies acquiring costly, highly sophisticated ADP systems to make the necessary lease versus purchase evaluations based upon estimated periods of application limited to their own requirements.The 1965 BOB study re- jected the GAO recommendation on Government-wide lease versus purchase evaluation, and some agencies, notably the Defense Depart- ment, concurred. In the Department's report on H.It. 4845, the argu- ment against Government-wide evaluations is stated as follows: It has been stated that a principal advantage of centralized procurement of ADPE is that lease/purchase decisions could be made on the basis of the total Government requirement for the equipment over its useful lifespan rather than on the basis of estimated use by the acquiring organization.. The Department of Defense position, based upon extensive experience with this type of equipment, is that it is practically impossible for a single agency to determine potential secondary users within the agency at the time of initial acquisition and that it is completely unrealistic to assume that any agency can make such determinations for the Government as a whole." The GAO has never suggested that Government-wide evaluations depend upon the specific identity of secondary users and their requirements at the time of equipment acquisition.And, were the identity of secondary users essential, the Defense Department's arguments could preclude lease versus purchase evaluations based upon the pro-. jected Government-wide use of equipment.It is teasonable that competent, officials fully cognizant of Government. ADP inventories and applications and knowledgeable of the capacities of the various systems the Government, acquires could on a sound, businesslike basis attribute secondary usage potential to certain selected systems which in their judgment have long-range utilization within the Government. Several of the agencies, and particularly the Department of De- fense, have expressed concern over the possibility of acquiring a large volume of excess Government-owned equipment with its accompanying administrative and storage expenses.However, there is no reason to anticipate such a problem.It is not the policy of the Government to store excess equipment for long periods of time, but to sell it as surplus in such a manner that the Government receives the fair market value of the property. Purchasing under these circumstances would be on a highly selective basis.In those instances when the Govern- ment did purchase a system, and no secondary utilization developed at the time it became excess to the initial using agency, the equipment; would be relatively new and the residual value correspondingly high.

PRIORITY OF PURCHASE OF SYSTEMS WITH GREATEST PURCILASE ADVANTAGE UNDER CONSOLIDATED PROCUREMENT Government ADP use is expected to increase indefinitely.Increas- ing billions in tax funds will be involved.It may not always be possible for the President and the Congress to allocate sufficient capital

" Hen r 1 ng H on MR. 4345, pp. 546-547. AUTOMATIC DATA PROCESSING EQUIPMENT 33 to the revolving fund to cover the purchase of all ADP systems which careful agency and Government-wide evnluat ions dictate should he purchased rather than leased.If the Government is to receivet he most value for its dollar, those systems with the greatest purehase :vivant age to the Government as a whole should be purchased wit II the funds a vailable,13udgetary considerations and funding problems in the various agencies should not preclude the Government from purchasing ADP equipment on a priority basis. This problem was recognized in the 1905 BOB study and was discussed in connection with "Budget Considerations": Decisions with respect. to the purchase or rental of a computer inevitably become involved in budget considerations. [n most cases, budgets can be prepared or adjusted to accom- modate either decision. In other cases, an administrator with limited funds available to perform his mission may find it undesirable to devote a substantial portion of his fluids to a capital investment if so will force him to forego an essential element of hisIns operating program. In these cases, the choice reflects a decision on whether the purchase of equip- meit will yield a, return in t he form of long-range savings that is greater than the return to be obtained by devoting the funds to an ot her purpose.In 0 overnmeatunl ike most industries %Olen, similar judgments must be madethis decision often cannot be validated by agencies because the benefits resulting from public service functions usually can be measured only by value judgments. Although it is recognized that budget considerations may, at t lines, cause a temporary deferral of a decision to purchase, the circumstances should he fully documented to show just ification for such action, and steps should be taken to effect the budget adjustments which would permit, purchase as early as practicable." At. this time an agency with budgetary problems may well have to postpone the purchase of ADP equipment.Yet. at the same t another agency may acquire another system requiring- a comparable outlay of capital in which the advantage of purchase over lease is substantially less. Under the present agency-by-agency approach, not only can individual agency budgetary problems arbitrarily interfere with the Government's purchase of equipment which lease versus purchase evaluations indicate should be purchased but, more important, there is no simple, and effective means for the systematic purchase of that equipment. which on a priority basis offers the Government as a whole the greatest purchase advantage. Under H.R. 4845 through the use of the revolving fund, GSA. could very easily apply available ADP capital to the purchase of that equipment offering the highest purchase advantage. G. H.R. 4845 AuTuomzEs ExEmmoNs AND PERMITS GSA To DELEGATE AUTHORITY TO .i-k.GENCIES TI1E ACQUISMON OP EQUIPMENT As previously discussed in th;s report, general-purpose ADP systems are made up of varLDus combinations of mass - produced, commercially available components.It. is these general-purpose, mass-produced,

,°1965 BOB ADP study, p. Mt. 34 AUTOMATIC DATA PROCESSING EQUIPAIENT coinnvitilly available ADP components and t he systems created from them that come within the confines of this legislation.Digital and analog component s forming a. part of I actical vapons or space systems lvhich have r, 1 general-purpose applicability would he wholly excluded from this program.Procurement of this latter equipment would remain the complete responsibility of the. Defense Department and other agencies that have requirements in these areas. General-purpose, mass-produced, commercially twat la ble ADP components used in conjunction with specially designed components and as parts of systems with unique scientific, crypt °logical, or military applications of a strategic nature would also come within provisionsof this legislation for acquisition, inventory control, and potential second- ai.y usage although such components or systems might not he available for sharing. Generally, there is no justification for exempting such components simply because theequipment,is initially applied to scout highly specialized application or used under conditions which preclude sharing.Once the components selected by the :Tetley are acquired by GSA, they would be turned over to the agency to be used in whatever specialized application the agency had planned with no further participation by GSA except inventory reports until the component, becomes surplus. Examples of equipment coming within this category would be the ADP used "in line" to control space vehicles in flight and the backup or redundant, systems which must. be available for this purpose. Also equipment, used in highly sensitive security work by agencies such as the Federal Bureau of Investigation and the Central Intelligence Agency (CIA), which offer no potential for sharing, could readily be acquired under a general Government, acquisition program and used for other purposes when surplus to the initial acquiring agency. Although the ADP to be included under this management program could be more closely defined at this time, the committee is concerned t hat. rapidly shifting developments in the interrelated fields of defense, space, col manicat ions, and ADP could make, any presently acceptable distinct ions obsolete.And, as this legislation invol ves the internal operations of t he Government, there is no pressing need for strict statut ory delinit ions. As in keeping with the general concept of H.R. 4145, the specific definition of general-purpose ADP equipment is left to the BOB and GSA and the issuance of appropriate regulations.

EXEMPTION Or SYSTEMS VIM I:EAS11N:4 01' NATIONAI, SI:CrIZITY Olt DEFENSEOn Ecoxonv .vsn ErricaN.cy As backup to avoid compromise of our run ional security or defense and to assure economy and efficiency, the Administ rot or of General Services is authorized to exempt individual systems from provisions of this program. Itis of paramount iouportanee that a genvies w it h intelligence or secret responsibilities maintain their security in line with appropriate Federal statutes and as the President; might direct under provisions of this bill.

1:Xl.:311'T1)N l'All:N1:Y.m;I:Si'VII The Department of Defense strongly recommends that language Ile included in the, hill afford in,.r the agency heads the discretion of exempt nig equipment from prockions of this management propTa a7. AUTOMATIC DATA PROCESSING EQUIPMENT 35 The DOD's recommended amendment, is in such broad terms as to permit the Department, in the discret ion of the Secretary of Defense, to ex- chile all Defense Department Al)] ,"As I he Comptroller General has so strongly recommended, any exclusion of an entire agency from this management, program would be wholly inadvisable.Realis- tically, such discretion in agency heads might soon exclude all Gov- ernment ADP which otherwise would come within this program. In view of the authority extended the Administrator of GSA to exempt specificsystems from the program for reasons of either national security and defense or economy and efficiency, the committee does not believe that any general exemption, such as the DOD recommend, would be appropriate. Furthermore, as expressly provided in the bill, should GSA make any decision which the user feels is adverse to his interests, the appropriate agency would have the right to appeal to the BOB, and, if the problem was of sufficient, magnitude, to the White House. Under 4845, this entire management program would be under the express direction of the President.Ex- chu,:ionary authority such as the DOD suggestsis thereforeun- necessary and inappropriate.

L'ltAlll :11.1311.1,1MENT-Vni)X Op 31 NAGEMENT 39:(1(0:.3E Implement:it ion of the coordinated ADP management program provided in 11.1i. 4-845 would be gradual. Subsection 111 (b) (2) expressly provides that the Administrator may delegate authority extended to linn under provisions of this legislation to the extent lie considers such action "necessary and desirable for the orderly implementation of a program for the utilization of such equipment."Utilizing this authority, the Administrator would implement this more effective management, program on an orderlystep-by-stepbasis so as to avoid the disastrous dislocations that would undoubtedly accompany any at tempt to completely alter management. of ADP overnight. Upon approval of this program, an initial step would be to establish a comprehensive inventory system carefully designed by experts so that necessary recurring information needed for all levels of Govern- ment ADP management would become routinelyavailable.Col- lateral to the establishment of this inventory, GSA would seek appropriations from Congress to set. up the ADP revolving fund and work out with representatives of the various agencies the most acceptable methods by which the agencies would reimburse the fund for equipment use.After the revolving fund is established, GSA could provide for the transfer of presently held general purpose ADP components to the -fluid. Once accurate, up-to-date in formation on available capacity and prospective requirements became available, a more advanced sharing program could be developed.Using ADP equipment, GSA could examine various slurring alternatives and fully exploit available, but. unused, Government capacity in meeting the. Government's requirements.Essentially, GSA, with adequate information. couldplac,,. Government sharing under positive direction. As, er the inventory system and the revolving .filnd have both been set, up and other aspects of the program have been implemented, GSA would. then begin to coordinate Government acquisitions to achieve a

tipn rings on 11.11. 4 S45. pp. 179, 230-233, I I. IN TL SO.!, S9-1. - 38 et; 36 AUTOMATIC DATA PROCESSING It; Q UIPM ENT larger volume of purchases and leases or combinations t hereof. The savings inherent in this management program do not require compromise in the selection or the use of the equipment. If an agency has an unexpected need for ADP or if an agency deadline must be met, these delivery requirements must, not be ignored to achieve greater volume acquisitions. However, if agencies keep GSA's inventory system fully apprised of future requirements through a system of long-range planning and forecasting this information can be used to coordinate and bring about volume acquisitions and more reasonable purchase and lease prices. H. CONCLUSION This legislation is essential to effective, Government ADP management. Const itut ing a broad perimeter of authority to BOB, GSA, and the Department. of Commerce, it provides the management techniques which have heretofore been lacking in Government ADP management. Time bill emphasizes the need for adequate information in effective management and Government-wide coordination. The bill also recognizes the desperate need to improve the Government's bargaining position in equipment acquisition. Numerous ADP management problems remain to be resolved. Al- though H.R. 4S45 does not extend to agency equipment selection, every- one concerned agrees that there is a critical problem in this area. Equipment compatibility and "input and output" standardization must also be dealt with in substantive terms.They cannot be solved directly through legislation.But if the Government's ADP management is put in order through the establishment of this Government- wide coordinated management, systen), 'these other costly and difficult problems can he more easily isolated and resolved and the Govern- ment's use of ADP made more effective. At this time, most Govern- ment ADP applications fall within the more routine data processing capabilities of this equipment. The Government's checkbook is kept balanced through ADP, but. ADP, though it has the potent ial, is not widely used in evaluating the most, efficient rummer in which Federal funds should be spent.During the. years to come, ADP will be used more and more in the deeisionmaking process and the .Government ADP equipment costs will surpass any sum we can nowu nagme. During the course of this committee's consideration ci ADP legislation over the past. 3 years, numerous agencies have been skeptical of the need for legislation as well as certain provisions of this particular bill. The committee does not expect this program to be implemented without. difficulty. But the difficulties t hat might be met after passage of H.R. 4.845 are much preferred over those which at this time and in years past unnecessarily cost the taxpayers hundreds of millions annually.Based upon two comprehensive BOB ADP management studies, about 100 General Accounting Office audit, reports, and 3 years of active investigation by this committee, the time has conic for Con- gress to take reasonable but effective action to assure the establishment of efficient ADP management in Government. IV. COMMITTEE AMENDMENTS The committee recommends the adoption of six amendments to H.R. 4845: First, the language "or at the expense of" is deleted from subsection 111(a) of tliglirill on page 2, line 1, so as to exclude ADP equipment. ouvicolav VWVU oxissapoua INalvdratm LC

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JO tplIS 4uatu(l!uba .1.0!)011v wampum)! pi(Ium op!Ao.td .tos u aA!suallaiduloa rutitiuu )30(10.1 0) ssailluoD uo alp day luomatluutui unlaoad paqsliquiso hq 5!q) 1toto1s!z'o1 uI pp! !tom 0) uu 11010aau Jo 54(Iaaa.t 's4uattrasattqstp pull slassuual snoaumaaslui sidpoai Su paa!nbai ut uooasqns III (o) oq alp ao)ualslullupy piuo..t pailnbai lttuqus. yunuut luatud!ttba Sioluamq 'uopuzmin put .sumilsinbou 44 .1i t 9 38 AUTOMATIC DATA PROCESSING EQUIPMENT The other amendment would provide a more specific meaning to the term "requirements" as used in subsection 111(g) of the bill. The amendment would add the phrase "including the development of specifications for and the selection of the types and configurations of the equipment needed" to the second sentence in subsection 1110). The Controller of the AEC strongly recommends this additional language as a clearer manifestation of the committee's intent that GSA not come between the manufacturer and the user in the determination of requirements or selection or use of equipment. The committee's confidence in the Administrator of GSA. is mani- fested in the broad authority extended him under this legislation. The committee is not concerned that H.R. 4845, -Without this amendment, would cause any disruption in user agency responsibilities in these areas.However, as the additional langunge fully reflects the committee's intent, it is recommended that this clarification ns to what is meant by the term "requirements" be added to the bill.It should constitute a further assurance to the agencies that it is neither the purpose nor the intent. of this legislation that their responsibilities in the selection and use of ADP equipment lie compromised in any way. V. SECTION-BY-SECTION ANALYSIS OF Itil. 4S45 1I.R. 4845 would add section 111 to the Federal Property and Ad- !Midst rat ive Services Act of 1949 (63 Shit. 377), extending responsibility to the Administrator of General Services, subject to overall direction by the President and fiscal and policy control by the Bureau of the Budget, for the economic and efficient purchase, lease, and ut ili- zation of automatic data processing equipment. necessary to meet the requirements of the Federal Government.The proposed new section is divided into seven sobsections.Subsections (a) and (b) provide the basic aalhority to be exercised by the. Administrator of GSA. Subsection (c) authorizes the establishment of a revolving fund to finance the activities undertaken by the. Administrator in pumance of this authority. Subsection (d ) provides for the administration of this fund, and subsection (e) prescribes that other provisions of law which are inconsistent, with the provisions of this sect ion shall not be applicable in the administration of this section.Subsection (f) authorizes the Secretary of Commerce to undertake nevessory research and to provide scient fie and technologien1 advisory services relating to the use of automatic data processing in the Government. Subsec- tion (g) provides that the authority conferred by this sect ion shall be exorcised subject to direction by the President and by the Bureau of the Subsect ion (a) authorizes and directs the Administrat or to coordinate and provide for the purchase, lease, and maintenance of automation data, processing equipment to meet the requirements of Federal a ffencies. ''Sultsect on (b) authorizes the Administrator to provide automatic data processing equipment suitable for efficient and effect ive use. by Federal ageneios through purchase, lease, or t ransfer of equipment between Federal agencies. to provide for joint use of equipment by two or more agencies, and to establish and operate equipment pools and data processing centers when such action in his opinion is necessary for the economical and efficient utilization of such equipment on a Government-wide basis.611% Administrator is also authorized to 41 AUTOMATIC DATA PROCESSING EQUIPMENT 39 provide for the maintenance and repair of such equipment by contract or otherwise. Subsection (b) further allows the Administrator to delegate authority under this section to Federal agencies to lease, purchase, and maintain individual systems or specific units of equipment when, in his discretion, such action is either necessary for economy and efficiency of operations, or when such action is essential to national defense or security.Authority may also be delegated in such circumstances to an agency to operate ADP equipment pools and processing centers. Solely on an interim basis, the Administrator is further authorized to delegate authority on a general basis in his discretion to the extent necessary or desirable to allow for the orderly implOnentat ion of this coordinated Government-wide management program. The term "Federal agency" as used in this section 111, is defined in the Federal Property Act, to which H.R. 4845 is an amendment. The term extends to "any executive agency or any establishment in the legislative or judicial branch of the Government (except the Sen- ate, the House of Representatives, and the Architect of the Capitol and any activit ies under his direct ion)." Subsection (c) authorizes the establishnent of an automatic data processing fund.This is to be a fund wit hout fiscal year limit at ion to be used to finance expenses incident to the Government-wide data proeessing program provided for in this section. Such expenses include those incurred for personal services, purchases, rentals, maintenance and repair, and direct, operation costs of ADP service centers, as well as other related costs.Following receipt of advice of agency requirements and appropriate evaluations as to the availability of currently held equipment, the Administrator would, when necessary, purchase equipment, through use of capital in the fund, or if more advantageous, lease equipment through use of such funds. To keep the capital of the revolving fund intact, the user agency -would reimburse the Administrator for the use of the equipment on an annual or other periodic basis in sums as determined under subsection (d). Periodic payments would be made for regnla, recurring services, and individual payments for specific intermittent services. User agencies would include in their budgets requests for funds necessary to meet these charges.However, to provide for the additional capital to cover equipment purchases during the period of initial implementation of the program, and to cover future increases in capital fund requirements (reflecting greater Government-wide utilization of such equipment). the A dinnustnitor would make requests in the budget. of the General Services Administration for capital to be placed in the. revolving fund. The language of subsection (c) is sufficiently broad to include (be cost. of administration of the program if it appears at a later date that such costs should be paid from the revolving fund.However. in order to avoid confusion during the initial period of implementation of the program, the committee feels that such costs should at least temporarily be provided for by direct appropriation as is provided in subsection (d).Depending upon later developments, these costs would then be paid from direct appropriations or from the resolving fund at. the discretion of the appropriations committees of Congress. '42 Of vIvci .1.s:iivarntm

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Jam saua.c aq papiqoun III saitm paAtutio Jq1 .)s» saptiaJt; aq1 saamtutuoa .Alto lutio!ssaar00.) suoptqado.ul(Iu atqulaapp 41))1) !Ions s)soa !quoits 09 1!u1 4110 Jo aq) iltummaa punJ Si! pap!Aoad tiopaa(Iis (a) `..qiutqd spuniaa .10 sapa.toaaa .toppisaa Lows stio!nuado galls Su lot! spaaaoad Jo 111sod5!p J0 punt Spuload SI :salvo soplans put: sSatuou paApa,),) LII plantamas Jo ss..o) al-A:Loup 4sti11uia aau J(1 11.11iI)0,10 0) 0111 '10111J V .10)0 011) JSO[.1 JO 11J11J 1113S14 .1110S 1011 011103111 lull 1/0.1111110.1 0) 10:490 J01.01 .111J.1 SaSSO1 s! ol aq paLtaistwal 0) alp -suaa,L San stwattopasi .sid!a0a.! laasqus 00! (a) s)1!.10,01 10J at!) ,i!1!(1u,)!!(1(1utl! Jo .latuo suu!s!Aoad Jo mul q.)!qm pitum J!Ltui 011) .s..q.lotiplu Jo aq) aunlaispqmpy s!!!) 11U .IJI pasodo.ul plautpuatuu 0) at!) paapad Smado.)I pm) -tutupIr a.%!10.11s1 saal.uas Joy Jo '61-61 put: Slivainaads at!) os!Auad ju!mouoi. lidu.rduau(I 1101pas 10F, (u) Jo pun Jo!pualxa u!upaa 0) 0111 Sau)a.loas Jo asuaJaa 0) lthalaxa aq) ,11))!)11v: -qu)sa quatuqs![ J nom soo!s!.w.id Jo atii spoload .4.)v 511 lidm Sr stoos!.,old Jo uouDas E09 (p) Jo s!!!) loll jupuuarl suu!)(1tuaxa 0) vA,T, put: s.),)q)o au, Saulaapas Jo aaaattunuo s! paztautintu tt! pasqus llul J) ( 0) -0.01 op!.1 ol)911a1as pun ruoiriolutiqaal S,10s!A111 :-.:ao!Aaas :iitunqoa 0) ltI\' 0) aql sa!Dua.th: put) .cuitiapatal (1) at)) la)suquip .10 Jo !walla!) et AUTOMATIC DATA PROCESSING EQUIPMENT 41 Services in exercising the authority delegated in this legislation.The Secretary of Commerce is further authorized to make recommendations to the President relating to the establishment of uniform Federal ADP standards.This subsection also delineates the authority of the Secretary of Commerce to undertake research in the sciences and technologies of automatic data processing systems.It is not intended that activities carried out under this authority duplicate or preclude research being done by other Government agencies or private industry. Subsection (g) provides that the authority conferred upon both the Administrator of General Services and the Secretary of Com- merce by this amendment, shall be exercised subject to direction by the President and to fiscal and policy control by the Bureau of the Budget.The Administrator is specifically precluded from impairing or interfering with the determinations by the agencies of their .1DP requirements.Under this program the user would develop the specifieations for and select the type and configuration of equipment needed.The Administrator would then procure the selected equipment and supply it to the users.The Administrator is further precluded from interfering with or attempting to control in any way the use of equipment or components furnished to the agencies out of the fund.The Administrator is required to give adequate notice to all agencies and other users of any proposed determination specifically affecting them or equipment used by them.If the user concerned and Ilse Administrator fail to agree on the proposed determination, the issue shall be subject, to review and decision by the Bureau of the Budget, or as the President. may otherwise direct. VI. AGENCY REPORTS ON H.R. 4845 (The agency reports and comments received on H.R. 4845 follow :) Com emoutat GENERAL OF THE UNITED STATES, Washington, D. (1., March 22,11)65. lon. `\'iI1.1AM L. DAwsoN : Chairman.Commit tee on Government Operations, JIo ose of Representatives. DEAR MR. CII A IRMAN : Reference is made to your letter of February 19, 1965, and letter of February 26, 1965, from the chairman of your Governnient Activities Subcommittee requesting our commentson H.R. 4845.This bill would provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data. processing equipment by, or at the expense of, Federal departments and agencies. In our letter to you of May 15, 1963 (B-151204), we submitted our views regarding H.R. 5171, 88th Congress, a similar bill to H.R. 4845, 89th Congress. Also, by letter of August 4, 1964, we made a report to the chairman of the Senate Committee on Government Operationson a proposed amendment of H.R. 5171 in the nature of a substitute that was prepared in an effort to meet objections of the Federal agencies to the provisions of H.R. 5171 as passed by the House of Representa- tives.In our comments on H.R. 5171 and the amendment to H.R. 5171, we expressed the belief that enactment of the bill would be in the interest of the Government and would result in considerablymore 42 AUTOMATIC DATA PROCESSING EQUIPMENT economical procurement and utilization of automatic data processing equipment. In commenting on RR. 5171 and on the proposed amendment in the nature of a substitute for H.R. 5171, we included the following statement which we feel reflects our views on this matter: "In our report to the Congress dated March 6. 1963 (B-115369), on the 'Financial Advantages of Purchasing over teasing of Electronic Data Processing Equipment in the Federal Government,' we pointed out that. there is need in the Federal Government. for an effective mechanism to coordinate and control the purchase, lease, maintenance, and utilization of EDP equipment. Accordingly, we recommend to the President of the United States that he establish such an office in his organization. We are of the opinion that, overall policy guidance and direction of the Government's data processing programs can be most. effectively accomplished through the efforts of a small, highly placed central management office in the executive branch of the Gov- ernment. However, we recognize that there are various ways in which central control can be exercised over the procurement, and utilization of this type of equipment. H.R. 5171 provides such an alternate method. We are not opposed to the method set forth in H.R. 5171; however, we feel that the mechanism proposed in H.R. 5171 for carrying out the detailed operations of coordination and control needs to be subject to the policy guidance and overall direction of the Oflice of the President." We note that the proposed bill, H.R. 4845, provides in paragraph (g) that. the authority conferred upon the Administrator and the Secretary of Commerce by this legislation shall be exercised subject. to direction by the President and to fiscal and policy control exercised by the Bureau of the Budget. In our report to the Congress dated April 30, 1964 (B-115369), on the "Review of Problems Relating to Management and Administra- tion of Electronic Data Processing Systems -in the Federal Govern- ment." Ave reviewed several problems pertaining to the management of EDP systems in the Federal Government. We commented that these problems have arisen largely because of the. decentralized system of management used whereby each using agency makes its own decisions on the procurement and utilization of EDP equipment, without regard to the economies available from considering overall Govern- ment needs. We further commented that our review of these problems and the manner in which they can be resolved to the maximum financial advantage of the Federal Government has reinforced our earlier conclusion that, an effective central management organization with appropriate authority and responsibility is needed to exercise control over the procurement. and use of data processing facilities and related costs being incurred by the Government. In addition to our March 6, 1963, and April 30. 1964, Government- wide reports, we have issued 04 reports to the Congress covering reviews made of selected aspects of individual agency or Government contractor automatic data processing systems.These reports have contained numerous examples of deficient, management, of automatic flat a processing equipment. and of potential savings through more effect ive and centralized management of these facilities. 45 If AUTOMATIC DATA PROCESSING EQUIPMENT 43 With reference to the policies and procedures set forth in the bill, we offer the following comments for consideration : 1. We suggest, that, the following sentence in subsection 111(g), pages 5 and 6, be deleted : "The Administrator shall not interfere with, or attempt to control in any way, the use made of automatic data processing equipment, or r:omponents thereof by any agency or user." This provision would place undue restrictions on the Administ re t or of General Services which would preclude the attainment of the most effective and economical procurement and use of automatic data processing equipment.. We believe that this provision conflicts with other authorities granted the Administrator. Furthermore, we believe that this provision could negate the authority granted in section 111(b) (1) to the Administrator to require joint: utilization of automatic data processing equipment by two or more agencies or to establish and operate equipment, pools and data processing centers for the use of two or more agencies if those agencies are unwilling to operate in such manner. 2..The bill .provides that a report of receipts, disbursements, and transfers to miscellaneous receipts relating to the automatic data processing funds be made annually to the Director of the Bureau of the Budget and to the Congress.The type of report called for is somewhat; limited and we would recommend that the bill require a more complete financial report.Accordingly, we suggest. that the words "a report of receipts, disbursements, and transfers to miscellaneous receipts, under this authorization" be deleted and the following substi- tuted: "appropriate reports on the financial operations of the fund in accordance with the regularly established requirements of the Bureau of the Budget." 3. We suggest that the bill provide that, after a date determined upon, based on recommendation of the Administrator, existing appropriations and, unless specifically so provided, future appropriations of the agencies concerned, other than appropriations to the fund, shall not, be available for the purchase or lease of automatic data processing equipment of the types taken over by the Administrator or for obtain- ing similar automatic data processing services by contract. 4. We note the term "organization" appearing on page 4, lines 5 and 6 of the bill.If by use of this term it be intended to authorize the Administrator to make equipment available for, or otherwise supply services to, private organizations, which would constitute an exception to section 3678, Revised Statutes, 31 U.S.C, 628, requiring the application of appropriations solely to the objects for which made and no other, in the absence of specific authority to the contrary, then adding the word "private" before the word "organization" would obviate any doubt in the matter. 5. We suggest that a provision be added to the bill to provide that no executive agency shall be exempt from the provisions of the bill excopt, under extraordinary circumstances. 6. With regard to the applicability of this legislation to Govern- ment contractors, we understand the reference, on page 2 of the bill, "or at the expense of, Federal agencies" is intended to extend authority of the Administratorover contractor equipment under negotiated contracts. 46 44 AUTOMATIC DATA PROCESSING EQUIPMENT We have taken the position that, to the maximum extent practicable, data processing equipment or systems required by contractors in the performance of negotiated contracts with the Federal agencies, where the whole or a substantial lima of the cost of such equipment or systems would become a part. of Uovemment contract prices, should be furnished by the Government with title or leasehold interest remaining in the Government subject substantially to the same laws and regulations applicable to in-house Government equipment. We believe the enactment of the bill would be in the interest of the Government and will result in considerably more economical procurement and utilization of electronic data processing equipment. There- fore, and subject, to the changes suggested above, we favor enactment of the proposed legislation. We will be available to testify at the proposed hearings and we will be pleased to assist the committee in any respect with regard to this matter. Sincerely yours, Josr,Pir CAMBELL, Comptroller General.

EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D .0 March 11,1965. 1-loil,Wimm3t L. DAWSON.. Chairnuzn, Committee onGovernmentOperations, House of Representatives, TV ashington.D.0D.C. DEAR 3IIi. CHAIRMAN : This will acknowledge your letter of Febru- ary 19, 1965. inviting the Bureau of the Budget to comment on H.R. 4845, a bill to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data-processing equipment. by the Federal departments and agencies. President. Johnson transmitted to the Congress on March 2, 1965, a report on Federal policy and practices in the acquisition and utilization of electronic computers in Government. The report, prepared by the Bureau of the Budget, is based on the results of a year-long study. It proposes a broad program to achieve increased effectiveness, coupled with greater economy, in the expanding use. of automatic data-processing equipment. In a letter transmitting the report, to the Congress, the President indicated that the policies and suggestions for improvement outlined in the report had his approval. Under the policies approved by the President, agency heads are held responsible for taking necessary actions to assure the most efficient and economic administration and management of their ADP activities. Within that framework of responsibility, the President expects the central agenciesthe Bureau of the Budget, the General Services Ad- ministration, and the Civil Service Commissionto develop policies and guidelines for the improved management and utilization of ADP and to exercise leadership in promoting interagency cooperation, coordination, sharing arrangements, and other measures to assure that Government's ADP requirements are met effectively and at minimum cost.. AUTOMATIC DATA PEOCES:qNG EQUIPMENT 45 To carry out the recommendation made in the 13ureau's report, no significant changes would be required in existing organizational ar: rangements or in the assignment. of responsibilities to the Bureau of the Budget, General Services Administration, Civil Service Commis- sion, Department of Commerce, or the departments and agencies. We believe, however, that there is a clear iieed to strengthen the resources devoted to the management of automatic data processing within both the central agencies and the line departments. In addition, enactment of legislation specifically addressed to the management of automatic data processing in the executive branch of the Federal Government, is considered desirable to reinforce and amplify the broad general authorities now vested in the Bureau of the Budget, General Services Administration, and the Department of Commerce. The report con- cludes that the lack of specific legislation now "creates unnecessary handicaps to the most effective management of ADP." Accordingly, the report recommends the enactment of general legislation (1) providing an expression of congressional policy on the acquisition and use of ADP equipment, and (2) giving a specific di- rective to the Bureau of the Budget and the General Services Admin- istration, within the areas of their presently assigned responsibilities, to take necessary actions to assure the most economic and effective use of ADP. The report also recommends that explicit. legislative authority be provided (1) for the establishment of a revolving fund to facilitate the establishment, of service centers, equipment, pools, mid t ime-sharing arrangements, (2) to provide authority to develop, measure, test, and make provision for the approval and implementation of Federal standards for ADP equipment and techniques and Federal .standard data elements and codes, and (3) to provide specific authority and direction to the Secretary of Commerce to establish a centralized research center on computer sciences and technology and to provide advisory and consultative services to Government agencieson computer systems development. and related scientific and technical problems. It is the view of the Bureau of the Budget that enactment. of H.R. 4845 would assist materially in carrying out the policies andsugges- tions for improving the acquisition and utilization of electronic computers which have been approved by the President.Accordingly, the Bureau of the Budget recommends that your committee give fai,orable consideration to H.R. 4845. Sincerely yours, PHILLIP S. HUGHES, Assistant Director for Legislative Reference.

GENERAL SERVICES ADMINISTRATION, IV ashington,D.0., Mara 15, 1.965. Iron. WILLIAM L. DAWSON2_ C hairmay. C ommittee onG overnment Operations, House of Representatives, Washington., D.C. DEAR MR. CHAIRMAN: Your letter of February 19, 1965, requested the views of the General Services Administration on H.R. 4845. 89th Congress, a bill to provide for the economic and efficient purchase, et. 48 46 AUTOMATIC DATA PROCESSES:C.; EQUIPNIENT lease, maintenance, operation, and utilization of automatic data proc- essina equipment by Federal departments and agencies. The bill would add a new section 111 to title 1 of the Federal Prop- erty and Administrative Services Act of 1949, 63 Stat. 377, as amended, which would centralize GSA control over allelectronicdata processing equipment required by Federal agencies.Financing would be provided by a revolving fund established by the section. Original capitalization of the fund would be by appropriation and transfer of assets, which would be reimbursed through user charges. The bill would provide legislation needed to supplement existing statutory authorities, remove any doubt as to the authority for functions presently being performed, and provide a clear statement of congressional policy respecting ADP matters. General Services Administration endorses the views set forth in the letter of March 11,1965, from the Director, Bureau of the Budget, to the chairman, House Committee on Government Operations, in support. of H.R. 4845. Accordingly, the General Services Administration recommends that your committee give favorable consideration to H.R. 4845. The Bureau of the Budget advises that, from the standpoint of the administration's program. there is no objection to the submission of this report toyour committee. Sincerely yours, Romirr T. Gnwrix, Ae/inqAdminislrator.

THE SECRETARY or DEFENSE, 111 asking ton,D.0 ., March 18,1.965. Hon. A31 L. DAWSON, C hit irm an, Committee on Government Operations, house of RepPesentatives,Washington,D .0 . DEAnMn. CHAIRMAN: Reference is made to your request for the views of the Department of Defense on H.P.. 4845, 89th Congress, a bill to provide for the econom.ic and efficient purchase, lease, maintenance, operation, and utilization of automatic data processing equipment by Federal departments and agencies. The Department of Defense concurs in the desirability of setting forth in legislation an expression of policy by the Congress on the acquisition and use of automatic data processing equipment by Federal agencies. Such an expression of policy by the Congress would be of assistance to the Bureau of the Budget and the General Services Ad- ministration in coordinating the management of ADPE throughout the Government. As you know, the Bureau of the Budget and the General Services Administration have already initiated actions which should materially improve the management of ADPE. A Government-wide reutilization program has been initiated within the last year which has been implemented throughout the Department of Defense.Under guidance provided by the Bureau of the Budget, ADPE sharing exchanges are being established by the General Services Administration and these actions are being fully supported by the Department of De- fense.Recently, the Bureau of the Budget issued. Circular .A-71 49 AUTOMATIC DATA PROCESSING EQUIPMENT 47 which is designed to further improve the management of ADPE within the Government and which specifically identifies the responsibilities of all agencies in this regard.This circular is intended to implement recommendations contained in the Bureau of the Budget Report to the President. on the Management of ,Automatic Data Proc- essing in the Federal Government which the President approved and transmitted to the Congress on March 2, no5. The Bureau of the Budget Report expressed certain conclusion on the matter of procurement and use of automatic data processing equipment. It recommended that Government agencies retain their present responsibilities for making decisions in this area, rather than have a separate central office empowered with authority to make these decisions. The latter course, the report concluded, will dilute the responsibility of agency heads for the management of their organizations and automated systems ; and would serve to divorce ADP management from the arrangements established by Bureau of the Budget Cir- cular A-71 with respect to Presidential surveillance over the overall management of the executive branch.It, would also interfere with direct Government agency - contractor relationships. With respect to the establishment of a centralized revolving fund for the acquisition and utilization of ADPE, the Bureau of the Budget report, as approved by the President, limited its recommendations on the use of such a fund. to those situations involving the establishment of service centers, equipment pools, and time-sharing arrangements or where it would be advantageous for appropriate Federal agencies on a. permissive basis to finance the acquisition and utilization of ADPE. There is contained in H.R. 1845 certain language which might be construed to require, on a mandatory basis, Federal agencies and their cont ract ors to obtain their individual ADPE requirements through the Administrator of General Services.The Administrator would pur- iase, lease, or transfer from oilier Federal agencies the equipment to meet these requirements.Exceptions would be permitted only at the discretion of the Administrator.Regardless of which agency procured the equipment, the bill could be interpreted to require the use of the centralized revolving fund provided for in subsection 111(c) in all cases. Use of such a fund on a mandatory basis would result in imposing another step in the procurement of ADPE. Aforeover, there would he extra costs to Federal agencies resulting from surcharges necessary to reimburse the General Services Administration for costs of operating the fund. In addition, it could discourage second and third users of the equipment since they would be paying rentals to General Serv- ices Administration for older and perhaps less efficient equipment that might be as high or higher than what they would pay for the most modern equipment. Under existing procedures for the utilization of equipment excess to one agency by another agency, there is a clear financial incentive to utilize such equipment. If it is Government- owned, it can generally be acquired at no cost except for transportation, pack=ing, and dismantling charges. If the equipment will do the job, the economic advantage over new equipmentis obvious.Even with leased equipment, the agency can usually obtain it at a substantial discount from the new price. Since the General Services Administra- tion could charge rentals as long as the equipment is in use (and would 4S AUTOMATIC DATA PROCESSING EQUIPMENT have to until it is amortized), the incentive to use older, perhaps out- moded, equipment is lost. The General Services Administ ration may then find itself eventually in the position of having a large inventory of unused equipment in warehouses or directing agencies to use this equipment-. even though newer, more efficient equipment is available at equal or lower cost.For the above reasons. the Department of Defense does not consider the establishment of a revolving fund for acquisition of all ADPE as desirable. The views of this Department with respect to ADPE in the hands of Government contractors have been made known to the Bureau of the Budget., the General Accounting Office, and to various committees of Congress.The General Accounting Office has issued a series of reports on this matter, favoring Government ownership for ADPE in Government contractor plants.Detailed comment to the Comptrol- ler General on his recommendations in this area were supplied to him on May 21,1964, a copy of which is attached. Department of Defense procurement policy is to place maximum responsibility on contractors for contract performance, including the responsibility for facilities acquisition to perform those contracts. This would include ADPE. The Department's policies of contractor responsibility go hand in hand with increased emphasis on the use of fixed-price contracts and contracts with wide-ranging incentives which are desigeed to insure the utmost in sound contract. management. by Government contractors.Acceptance of a principle which would provide all ADPE to contractors as Government-furnished equipment carries with it substantial penalty because (1) it represents increased Government control and intervention in private enterprise and management initiative; (2) it poses the extreme likelihood of the creation of a substantial inventory of idle ADPE: (3) the administration and caretaking of such an equipment inventory will be extremely costly; and (4) it overlooks the alternative that the contractor can purchase ADPE ini many cases with better advantages to the Government. It has been stated that a principal advantage of centralized procurement of ADPE is that lease/purchase decisions could be made on the basis of the total Government requirement for the equipment over its useful lifespan rather than on the basis of estimated use by the acquiring organization. The Department of Defense position, based upon extensive experience with this type of equipment, is that! it is practically impossible for a single agency to determine potential secondary users within the agency at the time of initial acquisition and that it is completely unrealistic to assume that any agency can make such determinations for the Government as a whole. We are in full support of the objectives of purchasing computers on the basis of proven economic advantage over leasing for the known application of the equipment. Lease/purchase analysis is made when the equipment is acquired and continually thereafter if the equipment is leased to assure that changed situations have not altered the original decision. The Department now purchases in all cases where the economic advantage is proven, based upon the known use of the equipment, and if the funds are available. The equipment is then assured of full amortization by the initial requiring agency and, as previously mentioned., reutilization of the equipment by a secondary user is helped by an ability AUTOMATIC DATA PROCESSING EQUIPMENT 49 to transfer the equipment at no cost.This procedure allows selected purchase of equipment where economy is assured and facilitates its reutilization, lint at the same time prevents a costly buildup of owned equipment which may or may not have further use to the Government. In view of the foregoing, it is recommended that in line 8, page 1 of the bill, the words "and provide for" be deleted; in line 4, page 2, the word "shall" be changed to "may"; in line T, page 2, the words "and directed" be deleted ; m line 12, page 2, the word "require" be changed to "provide for"; and in lines 13, 14, and 15, page i, the words "for lw efficient coordination, operation, utilization of such equipment by and for the Federit I agencies be deleted and substitute in lieu thereof the words "to establish and operate equipment pools and data processing centers by or for the use of two or more Federal agencies or t o finance at. I lie request, of a Federal agency the acquisition and utilization of sucli equipment." The chairman of the Subcommittee on Government Ad ivit.ies in his statement on the floor of the House of Representat ivies on February 11, 19G5 (p. 2586, Congressional Record), at the time RR. 4845 was introduced, stated that the bill contained exceptions necessary for reasons of security and defense and that it was not intended that I he legislat ion cover any specialized scientific or specially designed military API) system components. Virtually all specially designed ADPE developed for military purposes such as weapons fire control, tactical military field operations, scientific and engineering., missile and satellite tracking, weapons development, command and control, and communications operations are procured as integral parts of weapons and support systems.It should be further noted that commercial general purpose equipment is selected for these systems when it can perform satisfactorily.Selec- tion of specific equipment, however, must always be related to the total system andits interface requirements.The Department of Defense also makes extensive use of ADM' for intelligence and other highly classified purposes. Information essential to the selection and acquisition of this equipment is highly classified and H.s disseminaticm restricted accordingly.Certain agencies of the Department of De- fense inn ke extensive use of ADPE in accomplishing urgent cryptologic missions.Design or selection, production, testing, and updating of ADP equipment and the urgency and sensitive classified nature of the data to which the ADP applications are made require that the most rigid security measures and time schedules be applied.It is considered essential that determinations with respect. to ADPE of the types described above involving the national defense and national security be made by the Secretary of Defense.Accordingly, the following additional amendment, is recommended for incorporat ion in lite bill commencing on page 2,1ine 16: "This sect ion shall not be construed to apply to specially designed automatic data processing equipment forscientific,military or cryptologic uses and the head of a Federal agency is authorized to determine when any automatic data processing equipment should 1)e excluded from the provisions of this section for reasons of national defense or national security." In conclusion, the Department of Defense supports the enactment of H.R. 4845 if it is amended to include the suggestions set; forth 50 AUTOMATIC DATA PROCESSING EQUIPMENT above.It concurs in those provisions of IT.R. -1845 pertaining to responsibilities to be vested in t he Secretary of Commerce. The Depart- ment, of Defense is engaged in extensive scientific research and development, activities in the ADPli field primarily with respect to our military requirements._However, it believes that there is a definite requirement on a Government-wide basis for the type of services which the Secretary of Conuneree would provide under this bill.It is understood that the authority vested in the Secretary of Commerce by subsection 111 (f) is not intended to curtail or restrict Department of Defense research and development activities in this field. We will be happy to provide any further information that your committee may request.Further, the Department welcomes time opportunity to testi fy at hearings to be held on H.R. 4845. The Bureau of the Budget advises that, from the standpoint, of the administration's program, there is no objection to the submission of t his report, to the committee. Sincerely, CYRUS R. VANCE. Deputy Secretary of Defen.ve.

OFFICEor'1111:. POSTMASTER GENERAL. 'Washington, D.C., 31 reh 29,1965. I Ion. WILLIAM L. DAwsox, Clilroi C 0111/11itt oe on Go re rnment 0 perationN, Mime of RepresentothY8,11ra.shington, D.C. DEAR Mu. CHAIRMAN: Tliis is in reply to your request for a report on ILI?. 4815, to provide for the economic and efficient purchase, lease, maintenance, operat ion, and utilization of automatic data processing equipment, by Federal depart ments and agencies. The Post Office Department is already accomplishing many of the purposes of this legislation.During tk, past year, ADP activities of Our 15 regional ()dices have been consolidated into 6 data processing centers, which resulted in an increased utilization of equipment, and an est iiiiatccl cost. reduction of over $3 million a year. We have act ively participated in the Bureau of the Budget's experimental ADP sharing program in Philadelphia, where a member of the Department's regional office staff served as chairman of the regional shoring program.Since the completion of this experiment we have taken advantage, as far as possible, of equipment sharing opport unit les. In 1961, for example, the Department, arranged to use the Treasury Department's larger capacity computer for soiling employee earnings reeords of a quarterly basis to meet Internal Revenue requirements. This arrangement provided measurable time and financial advantage both Departments. Sharing has also been advantageous in the twilit of postal money orders.The Treasury Department now per- forms the reconciliation function on a joint-use arrangement, utilizing their equipment..This is saving the Post Office Department an outlay of over $500,000 a year. It, is noted that section 111(b) (2) provides that the Administrator of General Services May delegate to an agency authority to lease,

C. AUTOMATIC DATA PROCESSING EQUIPMENT 51 purchase, or maintain individual ADP systems or specific units of equipment when he determines such action to be necessary for economy and efficiency of operations.He may also delegate to an agency authority to lease, purchase, or maintain ADP equipment "to the extent to which he determines such action to be necessary and desirable to allow for the orderly implementation of a program for the utilization of such equipment."With respect to these provisions, it is our belief that management decisions as to when and where ADP will be used are the prerogative of the agency concerned.More impor- tantly, we believe that the General Services Administration does not have the expertise to make judgments respecting complicated postal operations, or the relationship of ADP equipment to such operations, in terms of efficiency and economy. Looking to the future, it is evident that ADP will become increas- ingly important to us in our day-to-day operations in various phases of the handling and transportation of mail as well as in tho management.Through the use of a comprehensive data-gathering net- work, we anticipate that sectional center workload forecasts will in t ime be provided for use by postal managers in planning more pre- cisely transportation and manpower requirements. Mr and surface transportation schemes are in the process of being developed anto- matically with a view to optimizing transportation routings in terms of time and cost.. We have an experimental project presently under- way which indicates the practicability of developing essential management information in such areas as production scheduling and work measurement, with payroll data being obtained as a byproduct from the overall process.Our research and development efforts involve the use of ADP and related equipment as control components for mail processing transport equipment. We are actively studying and testing a variety of new applications of ADP involving mail processing operations on workroom floors. Until these applications have been designed, developed, tested, and proved, the kind of equipment needed, the number of installations, and the incation of equipment cannot he determined.Here, as in the other areas outlined above, the expertise of postal engineers is required for efficient procurement, operation, and maintenance of ADP equipment. Computer technology, as we know it today, is advancing at a rapid rate, and it is reported that computer equipment becomes obsolete in 40 months or less.With this in mind, and with the General Services Administration passing on our requests for ADP, it, can reasonably be assumed that delay will necessarily result in the acquisition and cause increase in procurement leadtime. Such delay can he lengthy and result in reducing the value of the equipment being acquired. The Department agrees with the general design of the legislation to achieve a program of greater economy and increased effectiveness in the use of ADP equipment. The proposed sharing arrangements in the utilization of such ADP equipment, as recommended by the President, we believe will contribute greatly in meeting Government- wide ADP requirements at minimum cost, iind help to establish coin- mendable guidelines in ADP administration - management. ritivities. We are mindful, however, that th Post Office must operate within a framework of responsibility re g a day-to-day 39 ouvnoinv vaxa oxiscr.loolla INHIvainba

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GrximAr, C11rNsi r or Tnr. 11'mq/hit/ton, D.C., Mareb,10, 1965. IIc)11. WILLIAM L. DA wso x. hairman, Committee on Govern ment Operations, I/ou.se of Re presentatives,Wa.vh nyt on, U.C. .DE.th Mu. CitAtumAN: Reference. is made to your request for the views of this Department on H.R. 48-15, to provide for the economic and efficient purchase, lease, maintenance, operation, and utilisation of automatic data processing equipment by Federid departments and agencies. The proposed legislation would authorize t lie Administrator of the General Services Administration to coordinate and provide for purchase, lease, maintenance, and transfer of automatic data processing eququnent; to require joint utilization of such equipment.; to establish and operate equipment pools and data processing centers; and to delegate such authority to other Federal agencies.It would also provide for establishment of automatic data processing funds, authorize the Secretary of Commerce to provide, scientific and technological advice on and to recommend standards for automatic data processing. and place certain limits on t he authority of the Administrator and Secre- tary in carrying out its provisions. The Treasury Department supports the underlying objectives of the proposed legislation. While much can lie accomplished in t he economic and efficient use of automatic data processing equipment and techniques within the framework of existing; legislation, regulations, and t aumvo.tav luva ,r,Israwaratm on.prals!upupu sluaula.iluu.uu wag) .11th all 111m.100 sauplu.tpl: 04 i)(1 ) pun pdil!wf 11! 4(11 104114:llma JO uopvisOloi 110!)14,1) tip.tt sill 64uvolittcrits Sia.tilupti 'mon quow&utultu aaanosaa paint °mos suou4.001 JO .014 pasodo.td '110)14uisrtal .1a.tamot[ Sul!! -1.1111) 110pro1.) .N.1( fast p1110.11 ppl: 04 afil 1.1.10p0a Spin10,itt -s!iquiplr WU S031.1.10S .10V JO 5()'611;1 411,1111101Ln; 11 .11.)11 uo!40as LIT Jo (Fmt.tt 00!1;),)s(Ins saluis II! :114 41 ow:01040\r,, mup .11111ssoo0.01 (q) (I) * 'laud appums .10J asu In.lapaj s.)!30,-)11u 11011s i)(1 .04)00.1p116),) * * -0.01 papi.t I all aolualsplimpy q.1100.014 aaJsuna JO 410)(mItnix) ,111 * * (00.11 amp) 10.topad s'aptiallu .* 011,1, 41130(.11Am so.01.tou! spi) 04 I os ima.laistloa nom Pi tot a.t Is.tll two(' 001s!.t0.01 (maul 'pot obi) 1 joimo tssaaxo kiuts0 .000.011 10111 Ago.raip Qimpaul arpsi.:(0.1 );)0a.10J.10011 11 inu ,ipp(41: JO I ail .r:(1!:..;0 bui).11t: 04 .i.1.11:a 1110 sp. -0.1(1 u10.1,r1 sompq!stiodsaa sl 110!1.)o5(I05 (9) r) ( 1)100.1t ()sly op!.0)..1c1 i-011 .1011;.1Is!uptImr paz!.001400 04 pito!: Inzwp um Jo pus luatmlinho Aq OM4 .10 0.1001 luadpad ci.salo11,);11: spu, uo!simal s! 0u mo.1101(li: 4DR)00,) 114!At I 410[ 491 (10!si..0).0.1 JO 0014dasqus (.7) Jo lads not l T 11011)11 pluo.tt appo,td \r S1!ar)(14 os 00(.10 .10411.14stututpy Ip:qs 40u aq os -110J 1t:: 11011.1 S11 O1 0(1111! .1! .10 aai)J.14)(11 t.tt ) It 1wiivittutadidiPot[4 mdidtidni.) pm) .i0(110 s.t,m1 Jo .11.)111 puipt.t!put 0:010110) of mu)) `1110thsaaaul 10,110(1101)0 .swoula.11111al a!p:I ppo!phIns 411.0111.11)(lou sIsad.rins pup 4111 allutt.thiu[ 01 d/P8/./:»1/ 41110f -!hill .1101'l1:% 1)/110.11. a0 oppr.t.)Ja.til pun ppumt 01)0p),).01 0 appss0(.1 -.).01.1.-)01!squr 100!11:1 .tImpual O1 oatio.0).4.1.)101 qp.tt s.Satlitriu .ipp(p5(10(Is4.1 ()) .).1147 .c0.101.01 01 sit 1),-)0.11!ssu s; 0014.-m5(I0 04) () Jo (10!).),)s pinum opt.u.).01 I 'put ;.. -spIpupy .0)111.11 Sum olu.rfolop 01 aim .i0 wow 10.1.))),),4 s,)!;010.0 0.10(1111 0) -.0)(10 pm: uplp 00: alp:100pm u)up ,11ss,m0.1(1 slood .)0:01()00 11!ssa)0.01 F.Idlooa ,L ail 1.11:(10(1 MOW tA1111)1S110:) '11111 jI Si 1 Olt 1110)111 JO) I sill 110!).9.0).01 111 :)1([1:04 primmis!pposa JO galls 5100(.1 pm: -too s.1)1 .10J osti .c() ()At) .10 oaout aaptm pinto.) s110! 4011 0.10J00.0)(1 poz!.1014111u .c() pu(lau wow .00[1.111J sa.tailaq 41011 00!pas(Ins (z...)(q) Jo pos 00! '4 .1100111 .,)(1 00(11.0).01 0! 4sul aDiloplos 0! tiotposqus .()) pploqs 400 i)(1 Os is110) palm su 04 010110,10.1 ati) 1101111,14(10 puoll JO au 01 i)(1 .collokit: Jo stood .10 ma.) Atou amols!Na OM Mg 111: .101)1111 ISINO ;ill! .10 111} 11 al a1 00 y S.11).1)00.-) istlio -atm 01 tipm 11014aasqns 11014 pinom uraas aq lualstsuaau! pull land Jo tumi.tt sap!A0.01 ung5ao)u.t4spituipy 400 alojaam! adinallr..to't11ta% 01 10.1400.) 01 S10; 'Sum at) .asu opplu Jo u 110(10111 0! mup .11mssaao.uf who -(1 'mom .10 s4t0010(1100.) J0,-).10111 .iln: ,C0(1).;11: .10 .!atilt u()!saasqus ((1) (7,0 1)/00.0 0:91: opr.t0.01 4111f) all; .1041:1)s1.01.01py * ,;: i)juzlopl, ()I 000 .10 ',mom ivaapad soumiidu S.0..10(11011 01 'osnal 'osuip .10 uruppum pmpwptil 0!400104111: 0411p :4110ssaa0.0 smals.Cs .10 * * 1:)a([5 :)I[ slim' JO quat(01!Ill)i) Joint!! sno!au.t suomptr.) au, -4)(1 40a014.11:(1 .0)1)00 luas).01 'oaf is.04 splulanu aap11);01 0114 -0100 0:111 or Nip ti!ssoao.1(1 40.0101101).) smi pauptuo)op Si 'papihm .10J. spun," amill 110)(1 aapun gaup pap!.t0.01 S(4 'mut 1-)*(E4 81101S1,10.1d J0 lulapiu Spl(Ins Slamouth) MI) 111.101100 Sa01/1.Ii1S; 11V 111111 (1090.14S1 stag au l0 pall p.m Imo.un,101();) sao!pldils .0) (110.1; ssoaxa manI(Ipthi) J0 .tall!() 11:.1)i satoualill lo.topplAt Si oil) Isom .siuyaIluitlu.tpu aattio soaltios au: 400 posh ssapm n u.r400.) st 400 Slyeaalu eiquiplAu AUTOMATIC DATA PROCESSING EQUIPMENT 55 for the equipment needed or the equipment available under existing" efun Pacts can be obtained more economically' by negotiating :t separate contract.Assuming that the provision cited above be must rued to confirm This practice, t he Department would have no ()Nee. tion. Subsections (c) and (d) of section 111 would establish an "automatic data processing fund, which shall be available without. fiscal year limitation for expenses, including personal services, other costs, and the procurement by lease, purchase, transfer, or otherwise of equipment, maintenance, and repair of such equipment by contract or otherwise, necessary for flue efficient coordination, operation, utilization of such equipment. by and for Federal agencies * * *" The intent of this provision is not fully clear to the Department which believes that, the existing provisions of the Federal Property and Administrative Services Act of 1949. as amended. already authorizes at fund which the Administrator of General Services may use to procure and maintain equipment for the use of executive agencies in the proper discharge of their responsibilities. It is assumed, however, that the proposed fund would additionally provide for the funding of necessary automatic data processing centers as proposed in subsections (b) (1) and (h) (2), discussed above, and, further, could be used by agencies to finance the procurement of personal services, such as automatic data processing systems design and programing services where existing authority is inadequate. The Department, would not, object, to this interpretation, provided that, the provisions of subsection (e) notwithstanding, agencies would not be precluded from using existing authorities to provide similar services. The Treasury Department believes that subsection (f) would authorize the expansion of the currently limited efforts of the Depart- ment of Commerce in providing scientific and technological advisory services and proposing standards in the automatic data processing field.The Department, believes that such an expansion of efforts is needed and fully supports this provision. The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this report to your committee. Sincerely yours, FRED B. SMITH. ActingGeneral, Counsel.

Gr.xfatm, Courxsrr, orTI DEPARTMENT OP COMMERCE. Washington,D.C.,March.4 1965. Hon.JACK BROOKS, Chairman., Government Activities Subcommittee, Committee oil Go e- minent Operations. House of Representatives, 117 ash ington, D.0. DEAnMR. CliAIRMAN:This letter is inreply toyour request for the views of this Department on H.R. 4845, a bill to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data processing equipment. by Federal departments and agencies. 56 AUTOMATIC DATA PROCESSING EQUIPMENT No are in accord with the objectives of the bill and believe most of its provisions would be helpful in advancing the development, effective application, and economic use of automatic data processing throughout the executie branch.In particular, we believe that subsection 111(c) of the bill authorizing the establishment, of a revolving fund for equipping and operating automatic data processing centers to serve Federal agencies should enable some Federal agencies more readily and economically to exploit computer technology in their operations. Subsection 111(f) recognizes important responsibilities in the De- partment of Commerce. Under that subsection, the Secretary of Com- merce would be authorized to provide Federal agencies with scientific and technological advisory services related to automatic data processing and related systems, to submit recommendations to the President on uniform Federal automatic data processing standards, and to undertake in connection with the above necessary research in the sciences and technologies of computer and related systems. The Department of Commerce is a pioneer in the development. of automatic data processing technology and systems and under existing authority has provided an important part of the Federal research and development: in this area. While the Department's existing authority is very broad, we think it is appropriate in any legislation on central numagement of automatic data processing equipment, for specific lune- t ions to be assigned-to the SecretaryofCommerce. Such an assignment is desirable because it makes clear the relationship between the various agencies concerned with this very important subject. We do not construe subsection 111(f) as limiting in any way this Depart- ment's broad authority for scientific research. The Bureau of the Budget's recent report on the management of automatic data processing in the Federal Government, which the President transmitted to the Congress on March 2, 1965, recommended, among other things: "In order to improve the state of the art and to provide a source of expertise to the Government, agencies we recommend legislation to provide specific authority and direction to the Secretary of Com- merce to establish a centralized research center on computer science and technology and to provide advisory and consultative services to Government agencies on computer systems development and technical problems." 13u man of the Budget, Circular No. A-71, issued March 6, 1965. assigns responsibilities for the administration and management, of automatic data processing activities.The specific responsibilities of the Department of Commerce tinder the circular are as follows: "The Department of Commerce is responsible for aiding in the achievement of increased cost effectiveness in the selection. acquisition and utilization of automatic data processing equipment. und in this connection will perform the following functions: "(a) Provide advisory and consultative. services to executive agencies on the methods for developing information systems based on the use of computers and the programing and languages thereof. AUTOMATIC DATA PROCESSING EQUIPMENT 57 "(b) Undertake research on computer sciences and techniques, including system design, oriented primarily toward Government applications. "(c) Provide day-to-day guidance and monitorship of an executive branch program for supporting the development, measurement? and testing of voluntary commercial standards for automatic data processing equipment, techniques, and computer languages. "(d) Improve compatibility in automatic data processing equipment procured by the Federal Government by recommending. uniform Federal standards for automatic data processing equipment, techniques, and computer languages." We believe the language of subsection 111(f) of the bill provides adequate legislative recognition for these responsibilities. Subsection 111(b) of the bill places certain central functions with respect to ADP equipment in the Administrator of General Services Administration.In the report President Johnson recently transmitted to the Congress, the following conclusion was stated: "We have concluded that the establishment of a separate dice empowered with authority and responsibility to make decisions on the procurement and utilization of ADP equipment would dilute the responsibility of agency beads for the management, of their organizations, that it would serve to divorce ADP management from the established arrangements for Presidential surveillance over the overall management, of the executive branch, and that. it. would interfere with direct Government agency-contractor relationships un- nevessanly," Construing subsection 111(b) together with subsection 111(g), we believe. it, is clear that the central role of GSA would he subject to the direction and policy guidance of the President and the Bureau of the Budget; in accordance with the report; the President, recently transmitted to the Congress and that the agencies would determine their own needs for ADP equipment.Snbsect ions 111(b) and 111(g) could be considered ambiguous, however, with respect, to who shall make the final determination concerning the kinds of specifications of ADP equipment needed to meet stated agency requirements effectively and economically. Agency heads are charged with the responsibility for the proper and efficient, conduct; of their programs and need to have authority commensurate with thisresponsibility.This is particularly important when it. relates to decisions about the kinds of ADP equipment, needed to meet agency requirements.In ninny agencies ADP equipment, has become. a major resource on which program operations and the management strnteures of those agencies are vitally depen- dent.It is not, practicable to expect the Administrator of the General Services Administration to make or review decisions about agency ADP equipment, needs that. necessarily involve agency program and management judgments.Consistent with this understanding, we. :construe suhsection 111(g) as a limitation on the authority of the Administrator and as leaving to each agency the final determination with respect, to the kinds or specificat ions of ADP equipment needed for meeting the agency requirements effectively and economically. 60 58 AUTOMATIC DATA PROCESSING EQUIPMENT Subject to these understandings, the Department would favor enactment of I-1.11. 4845. We have been advised by the Bureau of the Budget that there would be no objection to the submission of this report from the standpoint of the administration's program. Sincerely, ROBERT E. GILES, General CounRel.

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, March '25,1905. I Ion. WuJaAm L. DAWSON, ChaiPinlla. mini( tee on Government 0 peratiorm, ou.ve of Re preNent a 1 ives,117 ashington, D.C. DEAR Mn. CHAIRMAN : This letter is in response to your request of February 19, 1965, for a report on 1-1.11. 4845, a bill "to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data processing equipment by Federal departments and agencies." The bill would provide for the Administrator of General Services In coordinate and control the purchase, lease, and maintenance of automatic data processing equipment by, or at the expense of, Federal agencies.It. would also establish an automatic data, processing fund on die books of the Treasury for the payment of costs incident to management of such equipment. Wean in general areement with the provishais of this bill.We :Teel licit ly approve of the provisions reserving the right of the executive departments and agencies to establish their own requirements. The agency responsible for the administration of operating programs must, have the authority to select the equipment it needs in order to carry out its programs and it should not be restricted in its utilization of equipment. We believe that section 111(g) of the bill contains adequate safeguards to permit effective and efficient administration of agency programs without undue interference. We believe the establishment of a cent ral data processing. fund to finance the aronisit ion and ma intenanee of automat ic data processing equipment. will permit more economical decisions as to whether equipment should he leased or purchased. Under present circumstances, an agency must lease the equipment even though longrun savings would result front purchase only because budget funds are not available. The neutral data processing fund will permit immediate purchase if all other factors indicate it would be more economical to do so. In summary, we approve of the bill so long as the bill clearly reserves to the executive departments and agencies the right to determine their own requirements. We. are advised by the Bureau of the Budget that there is no objection to the presentation of this report. from the standpoint of the administration's program. Sincerely, WILBUR J. COVEN, Anistant Secretary.

()a 61 AUTOMATIC DATA PROCESSING EQUIPMENT 59

DEPARTMENT OP STATE, Wa4lbington, D.C., March 1:.?, 1965. Ifon. WiLi.t.tm L. Dwsox. 011Ne OfRepresentatives. DEn MR.CHAIRMAN : The Department. of State appreciates the opportunity to comment on the bill, H.R. 4845, "to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data processing equipment by Federal departments and agencies." The Department's view of the proposed legislation is that it. is con- sist ent wit It the report to the President on "The Management of Auto- matic Data Processing in the Federal Government," which was approved by the President and submitted to the Congress on Mardi 2, 1965; and t hat administration of the bill would be in accordance with the provisions of Bureau of flue Budget Circular No. A-71, March 6. 1965, on the subject of responsibilities for the administration and management of nut omatic data processing activities. The Department. is pleased to observe that the bill does not place in another agency any management authority necessary to the successful attainment of its plans for extending the use of data processing systems which are designed to cope with continuing workload increases wit hut vorresponding increases in personnel. The Bureau of the Budget advises that from the standpoint, of the administration's program there is no objection to the submission of these v0111111(11 IS. Sincerely yours, Daum, s MAcAirritun Assistant Secretary for Congressional, Relations (For the Secretary of State).

DEPARTMENT OP THE INTERIOR, OFFICE OP TIM SECRETARY, 117 ashing t on, D .0 March. 23, 1965. Hon. Wit.r.tAm L. DAwsoN. Chnirmon, C,oman,ittce on Government Operations, 110ase of llepresentatives,11Tashingtan,D.O. DengMn. DAsos: This responds to your request for the views of this Department on H.R. 4845, a bill "fio provide 'for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data-processing equipment by 14 Merit] depart limits and agencies.** We recommend enactment of the bill. The bill reflects the recommendations made in the report entitled "The Management of Automatic Data Processing in the Federal Gov- ernment," which was transmitted to the Congress by the President on March 2, 1965. We concur, therefore, with the report on II.R. 4845 made to your committee by the Bureau of the Budget, which was sent to you on 'March 11,1965.

62 GO AUTOMATIC DATA PROCESSING EQUIPMENT The Bureau of the Budget has advised that there is no objeel ion to the presentation of this report from the standpoint of the administration's program. Sincerely yours, GI:onon E. ROBINSON, Deputy Assistant Secretary of the Interior.

1.)r.r.urrnr.x.r orLAMM. liraRhhigtOn, May 7, /96j.. Ton.IVIttaxn DAwsos, Cho irman.Com mit tee on. Government Operations, House of Representatires,1Vashington, D.C. rhlmt C1 IA 11:311AN : 'Phis is in response to your re(luest, for our views 011 II.11. 4845, a bill to provide for the economic and efficient, purchase, lease, maintenance, operation, and utilization of automatic data proce,ssing equipment by Federal departments and agencies. Shortly after receiving TI.R. 4815 for continent, we received Bureau of the Budget Circular No. A-71, cut hied "Responsibilities for the Administration and Management, of Automatic I)a.ta. Processing Ac- tivities." This circular establishes a Governmen -wide program for the coordination of ADP activities carried on by the Federal Govern- ment.It clearly prescribes the. wsponsibilities of the Bureau of the Budget, the General Services Administ rat ion, and other agencies with regard to ADP administ rat ion and opera( ions. it appears that Circular No. A-71 accomplishes the objectives of [.R. -1845 and, accordingly, enactment, of this measure seems tohe unnecessary at this time. However. we would have no (ilution to its enact urea if the Congress considers it advisable, The Bureau of the Budget, advises that, there is no object ion to the snlnnission of this report from the standpoint, of the administ rat ion's program. Sincerely, Wthr.mm Witrvz, ,S'erve tory of Labor.

ITETrit:vss'AnmIxisTn.vriox, OrricE .1.1 tr. A n3ttx is.rit:vron Vrrtat.% Ns' A FrA tits. 17Nh;nglon.D.C....1farrh X3,1 .965. ITon. ,TAct: Baoons, Cho; man, Government A et ;iqt irs Snbrommittee. Committee on. 61 or- ernment Operations, house of Re presen Wires, ashingtonD.C. DAn Mu. CITA InnAs: This refers to your request, for a report- by Ilse Veterans' Administration on 11.11. 4S45. 89111 C011."ITSS, a bill `"l'o provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of nut °mat ie data processing equipment by Federal depart meld s and agencies." H.11.4445 would amend the Federal Property and Administrative Services Act of 1949 to authorize the Administrator of the General Services Administration to coordinate Mid provide for the economic 63 AUTOMATIC DATA PROCESSING EQUIPMENT 61 and efficient purchase, lease, and maintenance of automatic dal a processing equipment by Federal agencies. As part of his responsibility, he would be a ri ti torized to transfer such equipment between Fedora', agencies, to require joint utilization of the equipment, and to establish and operate equipment pools and data processing centers. An automatic data processing fund would be established for the procurement, and maintenance or repair of '1DP equipment.Provi- sion is made for appropriations to sue!,; ;And and for the crediting of advances and reimbursements fromavailable appropriations and funds of other agencies, organizations, or contractors utilizing the equipment. This bill would also ant It orize the Secret a ry.of Commerce to provide agencies with scientific and technological advisory services relating to automatic data processing, to make recommendations to the President relating to the establishment of uniform Federal standards, and to conduct research in connection with this new .form. of science or technology. Tire bill also provides that the authority conferred upon the Administrator of the General Services .Administratior, shall not be construed as to Impair or interfere with determinations by agencies concerning their individual ADP requirements nor shall he interfere with, or attempt. to control, the use of such equipment by agencies. We in the Veterans' Administration are very much aware of the significant role that, automatic data processing and related :systems have played in increasing effectiveness and.improvingproduc- t ivity in Government, operations. We have made a most del ermined effort, to integrte hetaols of data processing with the services we are responsible for providing and have made them an integral part of our n ajor progra in operations.As a result, decisions concerning the procurement of this type of equipment, and the manner in whir it is to i ,e used, are di reedy related to thesuccessor failure of such programs. Flexibility and discretion in making these decisions are absolutely necessary for the effective administration of the programs involved. During the past few years the Executive Office of the. President, and he General Services Administration, Lave issued a series of bulletins and circulars which prescribe methods of selection, acquisition, and use. of automatic data processing equipment. (a) Bureau of the Budget Bulletin 60-6, March 1960, prescribed cruidelines for studying the feasibility of using equipment. (1)) Bureau of the. Budget Circular A-51,b0ctober 1961, provided guidelines for selecting equipment and deciding whether to purchase or lease. e) Bureau of the Budget Circular A-55, November 1963, is the basis for an annual inventory of ADP equipment use, costs, personnel, and applications. (d) 13u rea a of the Biah-ret, Circular A-61, August 1963, is an aid for agencies to assess their ADP programs. (e) Bureau of the Bridget; Circular A-27Tune 1964, creates APP sharing exchanges in the najor cities of the country. (f) GSA Regulation No. 36, April 1961, deals with the reuse or disposition of equipment which exceeds a user's needs. The Veterans' Administration has complied with all of these directives and the desired economies have been achieved.We have pur-

ea a 64 62 AUTOMATIC DATA PROCESSING EQUIPMENT chased all of our computers. Utilizat ion of nu r major systems is ext remely high ; for example, the two large 7080 systems were ut i hzed 1,443 hours ont of a possible 1,488 hours (07 percent) in January 1tai:i We are pad icipating fully in the GSA sharing exchange program both in Washington and throughout the country.(For further f acts, sce enclosure.) We are, of course, aware of the report. to eie President. on the management. of automatic data processing in the Federal Government, v1 deli has just. been completed by the. I3ueau of the Budget and was transmitted to the Congress on :(Earth 2, 1965. That report took the position that; the existing; organizational arrangements with respect to automatic data processing m the Federal Government, are basically sound.Such report, however, indicated a need to strengthen the resources devoted to the management of ADP,General legislation was therefore recommended which would (1) provide an expression of congressional policy on the acquisition and use of automatic.. data processing equipment.; and (2) give a specific direct ire to the Bureau of the Budget and the General Services Administration, within the areas of their presently assigned responsibilities, to take necessary ac- t ions to assure the most economic and effective use of automat is data processing. In addition, a specific legislation was recommended (1) 1 provide for the establishment of a revolving fund to facilitate the establishment, of service centers, equipment, pools, and time-sharing arrangements; (2) to develop, measure, test, and make provisions for the approval and implementation of Federal standards for ADP equip- nic.nt. and techniques; and (3) to provide specific authority and direction to the Secretary of Commerce to establish a centralized research miter on computer sciences and technology, and to provide advisory and consultative services on computer systems development and related scientific and technical. problems. We note that certain of these recommendations have been incorporated :n MR. 4845. Although this bill would give broad authority to the Administrator of the General Services Administration to coordinate the procurement and utilization of ADP equipment. by Federal agencies (includ in:r an- iority to transfer such equipment. between Federal agencies or to require its joint utilization), such authority is tempered by the provision that. it. should not. be construed as to impair or interfere with determinations by agencies concerning their individual A.T)P requirements, nor interfere with, or attempt. to control, the use of such equipment by agencies. Moreover, we note that the President has approved the recommendations contained in the Bureau of the Budget. study of the management of automatic data processing, and we further note the statement of the Bureau of the Budget in its report. of March 11, 1065. to your committee that the legislation proposed will assist in ear rving them out. Under the circumstances set. forth above, we would lump() objection to the favorable consideration of IT,R. 4845 by your committee. We are advised by the Bureau of the Budget that there is no object ion from the standpoint, of the, administration's program to the preent a I ion of this report; to your committee. Sincerely, W. .T. Daira, Administrator. 65 AUTOMATIC DATA PROCESSING EQUIPMENT ti3

Annual savings derived iron) parelume of ADP equipme))t, calculations based on January W65 use

Location 'rype s yst ern Date of purchasePurchase Amon lzat Ion 1 Animal (11111) Mice, net completed date i, savings z

i Philadelphia data[true-1401...... June 1000 $214,00 0 June Ithil $1'5,009 essitig center, 1401______..November 1962. 2110,000 November 1964.1 149,10X) 71189801:). _do.. 2,073.1001 Almost 1901 772,000 Atltlit tonal SOK June 1064 397,000 August 1007.... Rio, 000 far 7080. 1903 December 1905.. 22,000 rehruary 1909._ 7,010 11111es Man processing cen-1401. . ___ June (9Ce, 235,000 September 10144. 107,000 ter. 1401...... July 1903.______205, 000 September 1065_ 90.000 7000(89K) Julie 1017, 2,109,000 1 )ceember la64_,,, 800,000 Additional 80KSeptember 1964. 391,000 June 1007 ...... 143,090 tar 7990. 1903.._...... July 1005 22.1100 September 1968. 7,001 St. Paul data processing1401 ...... _ ...... November 1062. 384,000 June 100._ ... 140,00) center. 1401...... July (963 ..... _ 209,600 1)evemer 19415.. 1 lthnna 1404 printer April 1064 80,600 June 1007 27,000 added, Los Angeles data process- 1401 July 19011 172,000 A prIl 1067...... 40,000 hug center. Wasitinglon data process- 1401...... __ ___.JtIly 19Q...... ___ 210,090 October 1965 107,000 Ing center. Additional May 1964 00,000 August 1067.._. 30, 00) memory: 2 features. 2 tape drives_ .....October 1964_ _ 44, 000 May 1969 10 nuo )lines Veterans' Adminis- 1020 do 59,000 1 )ecember 1967._ (8.6011 trot ion hospital. Little hock Veterans' Ad- 1620 _do 55,000 September 1967. 10.1100 ministration hospital. Omaha Veterans' Adinin- 1020 oetolter 1961 55,000 November 1965. 13,50) Is t rat ion hospital. 1022 March 1904 10,000 July 1967 5,500 Total costs and esti- 7,449,000 2, 94 0, 500 mated annual savings.

Amortization completio a date determined by dividing tie p trebase prle by the annual savings. 2 Annual savings derived by estlimiting t he rental charges t he equipment Were not purchased and subtracting the annual multiletionce costs I' ront I lie result.Est Mattes of annual rental costs ore lamed on current utilization of t lie equipment.

Amu] c ExElloy CommissioN , II'ashingt on, D.C., (1).011,16, 1 965. Hon. 1VILLIA51 L. DAwsox, Chah.man,COM'Iniltee on Go v ern ment Operations, House of fiepresentativeN, 117 IA; ngi on,D.C. DEAR MR.DAwsoN: This is ill reply to your request, for the views of the AtomicEnergy ConllniSSion onH.R. 4845, a bill to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data processing equipment. l)' the Federal departments and agencies. As you are aware, President. Johnson transmitted to the Congress on March 2. 1965, a report, on Federal policy and pract ices in the acquisition and utilization of electronic computers ill Government. The Atomic Energy Commission was represented on the Advisory Com- mit tee to the Bureau of the Budget and on t he project stall' with respect to the study which resulted in this report to the Congress. We agree with the objectives of ER. 4845 and believe that they are consistent witht he policies and recommendations for increased efficiency and economy in the administration and management of automatic data processing equipment outlined in this report. We feel, however, that It would be desirable to clarify certain language presently appearing in the bill.For example, section 111(a) authorizes and directs the

66 Tea 64 AUTOMATIC DATA PROCESSING EQUIPMENT GSA. Administrator to coordinate and provide for the economic and ellicient purchase, lease, and maintenance of automat is data processing eqnipment. This authority could be interpreted so broadly as to include the select ion and acquisition of equipment or it might lie interpreted so narrowly to include only the negotiation of Federal Supply Service contracts. We believe that the functions to be performed by central agencies should involve primarily the issuance of policies, procedures, and guidelines for use by the. various departments and agencies and that the presently recognized respmisibl i ties of individual departments and agencies in managing their own ADP resources within such policies and guidelines should continue substantially unchanged. Accordingly, the AEC believes that the GSA Adminis- trator's responsibilities should be clearly defined and limited in the manner we have suggested.Another source of concern to us is the apparent absence in the bill of a clear statement, of whether GSA or individual agencies would have resPonsibility for budgeting and financing the acquisit ion of ADP equipment. We have been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the transmittal of t his letter. Sincerely- yours, Jot ix V. ViscioriainA (For General .Nlanager).

NATiox.u. AmiONAUTICS AND SPACE ADMINISTRATION. OFFICE OF TILE ADMINISTRATOR. Washington, D.C., March, 39,190. 11-011. JACK 1311001i'S. ha 1P1171111, GarrnMe111 AeliritieR Sabrninnrillee, CommitIre on Cr 01' - Critment Operations, House of Representatives, 117o8hington, D.C. DEAR Ain. CilAnor.ix: This refers to your request for a report by the National Aeronautics and Space Administration on !LP. hIS-15, a bill to provide for the economic and efficient purchase, lease. maintenance, operation, and utilization of automaticdat4t processing eqnipment by Federal departments and agencies. As we understand the. legislation, it,is designed to provide the necessary execnt ire authority and responsibility for the economical and efficient acquisition and.management of automatic data processing eiptipment.It is primarily directed to the processing of administrative types of data, such as payrolls, inventories, and personnel records.it would accomplish this by assigning certain general powers to the Administrator of the aeneral Services Administration. The National Aeronautics and Space Administration has studied those provisions and feels that they are well designed to carry out the purposes of the bill, particularly the provisions which would establish a revolving fund for the acquisition and sharing of equipment,.In the area of administrative use we feel that the proposed legislation presents no problem to this agency. The National Aeronautics and Space Administration is a specialized user of certain highly technical automatic data processing equipment, The newest and more complicated machines are macro AUTOMATIC DATA PROCESSING EQUIPMENT 65 integral parts of space experiments. The management of research automatic data processing equipment, particularly asit applies to space exploration, is highly sophisticated and must remain ex- clusively in the experimenting agency. We feel that the bill adequately protects the research agencies in that it not only provides that the Administrator's powers are not to be construea to impair or interfere with the determination by

agencies- and other users of their automat is data processing equipment requirements,it affirmatively permits the Administrator to delegate to Federal agencies authority to maintain individual automatic data processing systems when that action is necessary for the economy and efficiency of operations, the national defense or security, or for the orderly implementation of overall programs for the utilization of such equipment. Additionally, we note with approval that, the bill authorizes the Secretary of Commerce to provide scientific and technological advisory services relating to automatic data processing matters and to recommend to the President uniform Federal standards in that field. For the foregoing reasons, the National...eronantics and Space Administration recommends that the bill, H.R. 4o45, be favorably considered. The Bureau of the Iludget has advised that., from the viewpoint of the program of till. President, there is no objection to the sub- ission of t his report to I he Congress. Sincerely yours, IiivirAim L. C.u.L.ko IAN. ...I.,NiAtont (in/ %)/i.sliwor fm.Let! ; .1 if, f;

FEDEILII, AVIATION' AGENCY, OPPICE Or TI t li ADMINISTRATN. -Washington, D.C., .1! arch 1.5,196.5. Hon.WILLIAM L. DAwsox, Chairman. Committee on Government Operations, House of Representatives,Washington,D.0D.C. MAI: Mn. CiimirmAx: This is in response to your letter of Febru- ary 19,1965, and to Subcommittee Chairman Brooks' letter of February 26. 1965, requesting our views on KR. 4845, a bill to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data processing equipment by Federal denartments and agencies. We are in agreement with the general objectives of the proposed bill insofar as they would provide for the economic and efficient acquisition and utilization of Government automatic data processing equipment. The challenge will be in attaining the objectives without undermining the responsibilities of the individual agencies for their operations and the application of automatic data processing thereto. The FAA is at the present time installing an automated air traffic control system utilizing computer systems.Those systems have at- ea 6S 66 AUTOMATIC DATA PROCESSING EQUIPMENT tached to them specially designed equipment to work in conjunction with the computers. This highly specialized equipment is built to specifications which are required to satisfy the unique operational requirements for control of movement of aircraft, in the air.These computer systems are used 24 hours a day and every day of the year in a real time environment.It, is essential that we retain effective control over the (lesign, installation, maintenance and utilization of these and other specialized systems used in our teelmical operations. cannot, he available for joint use with other agencies. To transfer our control of these systems to GSA. would seriously hamper our efforts to carry out, our air safety responsibilities.It, would further be uneconomic as it would require a staff at GSA. matching the size and technical competence of the staff already operating at FAA. We expect therefore that full responsibility for these specialized systems will be delegat NI to FAA if H.R. 4815 is enacted. I appreciate Chairman Brooks' invitation to testify at, the March 23 hearing to be held by the Government Operations Subcommittee. I tun advised that the Bureau of the Budget intends to arrange presentation of the views of the executive branch at, that hearing and I do not see anything I could add to that presentation other than what have been Mated in I his letter. The Bureau of the Budget, has advised that, there is no object ion from the standpoint of the administration's program to the submission of this report to your conunittee. Sincerely, N. E. 11.muty, Administrator.

CENTRAL 'STEM:WI:NCR .AGENCY, OPEICE I)LI'UTY DIRECTOR OE CENTRAL TNTELLI 1i'ash-1110)n, D.C., 21pril 8, 1965. Iron. 1Vii.t.t.m L. DAwsoN. Cha;pinitn. Committee on Government OperationR, House of Re 'mese?) to ires,11Tash ingt on. 1).0. 1)EAn INN. CIL \ lizArAs: IVO wishIOSlIbMii 111e VieWS Of this A 0.ency on 4815, 89111 Congress, a bill to provide for the economic and eflicient, purchase, lease, maintenance, operation, and utilization of automatic data processing, equipment by Federal departments and ap.encies. We endorse IT.R. 418-15's objective to achieve economic and effective use of automatic data, processing equipment. Guidance, support, and standardization tire extremely important, goals in the automat ic data processing field.Further, we appreciate the problem of draft ing such lepisla lion to assure that. the authorit ies and responsibilities are suf- liciefit to the task, without. impairing the effectiveness of Federal agencies. As is the case with ninny other agencies, the Central Intelligence Agency regards automatic data processing. equipment. as an invaluable and indispensable aid in the performance of its responsibilities. Such equipment, has enhanced our capability to coordinate, cored:: o, and 69 ea AUTOMATIC DATA PROCESSING EQUIPMENT 67 evaluate the vital and complicated security data and intelligence information which we are receiving in ever-increasing quantities. CIA. uses both specialized and general commercial equipment in its automatic data processing program. In both cases? however, utilization is inextricably involved in the security responsibilities of the Di- rector of Central Intelligence. For your information, the National Security Act of 1047, as amended, provides, in part, as follows : * That the Director of Central Intelligence shall be responsible for protect ing intelligence sources and met hods from unauthorized disclosure.; **" (50 U.S.C. 401). Although we wholeheartedly support the basic objective of the bill, compliance by llle Director of Central intelligence with the full scope of the authorities and responsibilities of the Administrator, GSA, raises a serious question of conflict with the Director's statutory responsibility to protect intelligence sources and methods and data relating totheorg:ullzationof this Agency. We are informed that there is no intent to subordinate the security responsibilities of the Director of Cent rat Intelligence to the provisions of die bill.Tills was also indicated in the hearings and floor discussion on 5171, a similar bill int reduced in the SSth Congress, where we find numerous references to intelligence as an example of the type of activities the Administrator would or should exempt from the provisions of the, proposed law. While ILI?. 4S.15 provides the Administrator with similar authority to grant, exceptions from t he full scope of the bill, we feel that the potential for stat.utory conflict on this matter warrants clarification in the bill itself.Therefore, we recommend that there be added to the sentences which ends on line 3, page 5, the following proviso: ": Provided, That where a head of a Federal agency determines that compliance will require the disclosure of national security information for Nvhich he has responsibility, pursuant, to law, to protect from un- anthorized disclosnre, t he provisions of this section shall not apply." We will be happy to provide any additional information thatyour committee may request. The Bureau of the Budget has advised, that from the standpoint of t ho administ ration's program, there is no objection to the submission of t his report. Fait It fully yours, MARSHALL S. CARTER. Lieutenant General, U.S. Army, Depul y Director.

CHANGES IN EXISTING LAW AUDI.; BY 'TIE BILL, AS REPORTED In compliance with clause 3 of rule XIII of the Rules of the House of Representat Ives, changes in existing law made by the bill,as reported. are shown as follows (new matter is print ed in italic, existing law in which no change is proposed isshown in roman): GS AUTOMATIC DATA PROCESSING EQUIPMENT TITLE I OF THE FEDERAL PROPERTY AND ADMINIS- TRATIVE SERVICES ACT OF 1919, AS AMENDED TITLE IORGANIZATION

GENERAL SERVICES ADMINISTRATION Sic. 101. (a) There is hereby established an agency in the executive branch of t he Government which shall be known as the General Services Administration. (b) There shall be at the head of the General Services Administra- tion an Administrator of General Services who shall be appointed by the President by and with the advice and consent of the Senate, and perform his functions subject to the direction and control of the President. (c) There shad be in the General Services Administration a Deputy Administrator of General Services who shall be appointed by the Ad- ministrator of General Services. The Deputy Administrator shall perform such functions as the Administrator shall designate and shall be Acting Administrator of General Services during the absence or disability of the Administrator and, unless the President shall designate another officer of the Government, hi the event of a vacancy in the office of Wministrator. (d) Pendinj. the first, appointment, of the Administrator under the provisions of this section, his functions shall be performed temporarily by such officer of the Government in office npon or immedi- ately prior to the taking of effect of the provision of this Act as the President shall designate, and sneh officer while so serving shall receive the salary fixed for the Administ ra tor. (e.) Pending the effective date of other provisions of law fixing the rates of compensation of the Administrator, the Deputy Administra- tor and of the heads and assistant heads of the principal organizational units of the General Services Administration, and taking into consideration provisions of law governing the compensation of officers having comparable responsibilities and duties, the President shall fix for each of them a rate of compensation which he shall deem to be commensurate with the responsibilities and duties of the respective offices involved.

TRANSFER OP AFFAIRS OF BUREAU OP FEDERAL SUPPLY SEc. 102. (a) The functions of (1) the Bureau of Federal Supply in the Department of the Treasury, (2) the Director of the Bureau of Federal Supply, (3) the personnel of such Bureau, and (4) the Secretary of the Treasury relating to the Bureau of Federal Supply, are hereby transferred to the Administrator. The records, property, personnel, obligations, and commitments of the Bureau of Federal Supply, together with such additional records, property, and personnel of the Department of the Treasury as the Director of the Bureau of the Budget shall determine to relate primarily to functions transferred by this section or vested in the Administrator by titles II, III, and VI, of this Act. are hereby transferred to the General Services 014 71 AUTOMATIC DATA PROCESSING EQUIPMENT 69 Administration,The Bureau of Federal Supply and the office of Director of the Bureau of Federal Supply are hereby. abolished. (b) The functions of the Director of Contract Settlement and of the Office of Contract Settlement, transferred to the Secretary of the Treasury by Reorganization Plan Numbered 1 of 1947, are transferred to the Administ rator and shall be performed by him or, subject to his direction and control, by such officers and agencies of the General Services Administration as he may designate. The Contract Sett le- ment Act Advisory Board created by section 5 of the Contract Settle- ment Act of 1944 (5S Stat. 019) and the Appeal Board established under section 13(d) of that Act are transferred from the Department of the Treasury to the General Services Administration, but the functions of these Boards slum]] be performed by them, respectively, under conditions and limitations prescribed by law.There shall also be t ransferred to the General Services Administration such records, property, personnel, obligations, commitments, and unexpended balances (available or to be made available) of appropriations, allocations, and other funds of the Treasury Department as the Director of the Bureau of the Budget shall determine to relate primarily to the functions transferred by the provisions of this subsection. (c) Any other provision of this section not withstanding, there may be retained in the Department of the Treasury any function referred to in subsection (a) of this section which the Director of the Bureau of the Budget shall, within ten days after the effective date of this Act, determine to be essential to the orderly administration of the affairs of the agendes of such Department, other than the Bureau of Federal Supply, together with such records, property, personnel, obligations, commitments, and unexpended balances of appropriations, allocations, and other funds, available or to be made available of said Department, as said Director shall determine.

TRANSFER OF AFFAIRS Or T I IE FEDERAL WORKS AGENCY SEc. 103. (a) All functions of the Federal Works Agency and of all agencies thereof, together with all functions of the Federal Works Administrator, of the Commissioner of Public Buildings, and of the Commissioner of Public Roads, are hereby transferred to the Admin- istrator of General Services.There are hereby transferred to the General Services Administration the Public Roads, Administration, which shall hereafter be known as the Bureau of Public Roads, and all records, property, personnel, obligations, and commitments of the Federal Works Agency, including those of all agencies of the Federal Works Agency. (b) There are hereby abolished the Federal Works Agency, the Pub- lic Buildings Administration, the office of Federal Works Adinis- trator, the office of Commissioner of Public Buildings, and tht. dice of Assistant Federal Works Administrator.

RECORDS MANAGEMENT: TRANSFER OF TIIE NATIONAL ARC!! I YES Sno. 104. (a) The National Archives Establishment and its functions, records, property, personnel, obligations, and commitments are hereby transferred to the General Services Administration. There are

72 70 AUTOMATIC DATA PROCESSING EQUIPMENT transferred to the Administrator (1) the functions of the Archivist of the United States, except that the Archivist shall continue to be a member or chairman, as the case may be, of the bodies referred to in subsection (b) of this section, and (2) the functions of the Director of the Division of the Federal Register of the National Archives Estab- lishment.The Archivist of the United States shall hereafter be, appointed by the Administrator. (b) There are also transferred to the General Services Administ ration the following bodies, together with their respect ive fund ions and such funds as are derived from Federal sources: (1) The National Archives Council and the National I Eistorical Publicat ions Commis- sion, established by the Act. of June 19, 1934 (48 Stat. 1122), (2.) the National Archives Trust Fund Board, established by the Act of July 9. 1911 (5 Stat. 581), (3) the Board of Trustees of the Franklin D. Roosevelt Library, established by the Joint Resolution of July 18, 1939 (53 Stat. 1002), and (4) the Administrative Committee established by section 6 of the Act of July 20, 1935 (49 Stat. 501) which shall here- a ft Pr be known as the Administrative Committee of the Federal Reg - ister. The authority of the Administrator under section 106 hereof shall not extend to the bodies or functions affected by this subsect ion. (c) The Administrator is authorized (1) to make surveys of Gov- ernment records and records management and disposal practices and obtain reports thereon from Federal agencies; (2) to promote. in cooperation with the executive agencies, improved records management practices and cont cols in such agencies, including the central storage or disposition of records not needed by such agencies for their current use and (3) to report to the Congress and the Director of the Bureau of the Budget from time to time the results of such activities.

TRANSFER FOR LIQUIDATION OF THE AFFAIRS OF THE WAR Assrrs AnmixismAnox Sic. 105. The functions, records, property, personnel, obl igal ions, and commitments of the Win. Assets Administration are hereby transferred to the General Services Administration. The functions of the War Assets Adininist rotor are hereby transferred to the Adminis- trator of General Services. The War Assets Administration, the ollice of the War Assets Administrator, and the office of Associate War Assets Administrator are hereby abolished.Personnel now holding appointments granted under the second sentence of section 5 (b) of the Surplus Property Act. of 19.14, as amended, may be continued in such positions or may Ie appointed to similar positions for such tinge as the A dm mist rat or may determine.

REDISTRIBUTION OF FUNCTIONS Sec. 106. The Administrator is hereby authorized, in his discretion, in order to provide for the effect ive accomplishment of the fund ions transferred to or rested in him by this Act, and from time to time, to regroup transfer, and distribute any such functions within the General Services Administration. The Administrator is hereby authorized to transfer the funds necessary to accomplish said functions and report such transfers of funds to the Director of the Bureau of the Budget. 73 ouvnosav V.LVcI oNassaaoua Imanamba IL

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JO 15 p.1191011 11.10J 'SI 3100(3-1111:311 panpututi 6s1101)il0w:h11s pun .101330 pautia(I inpoputi lu uoltuu00 osti J011 :1 JO In.topaA 5010110Th: liAll ap3i 11.`,1110.110 oil) luoinionuaa(Ilic; (fi3th0m[1100(i pm: 13){1 Ilulosaa(1 so0!.t.ms .10J. 011 01111 JO 1:.1010,4 S013110.i111 113 mil .10(10.01 3a131 Yom11c1lytuniso.1 pun (3) .t0J. lu.C11d 1- ott) aut[0.01(1 6a)t.RI tlorul3.1()(istlu.tl jo intws.t0(1 .c).1odo.1(1 pun sool.uos pun oi11 ')sm) J0 inuos.ti)(1 saa!Aaos pa.ioldula Si)00a11) 11! art) 6.1nd0.1 uols.ia.titooptin't101.1up.p.quti Jo inuosaad ..fiaacload °/114.4C-- 72 AUTOMATIC DATA PROCESSING EQUIPMENT (b) Payment by requisitioning agencies shall be at prices fixed by the Administrator.Such prices shall be fixed at levels so as to re- cove so far as practicable the applicable purchase price, the trans- potation cost, inventory losses, the cost of personal services em- ployed directly in the repair, rehabilitation, and conversion of personal property, and the cost of amortization and repair of equipment utilized for lease or rent to executive agencies.Requisitioning agencies shall pay by advance of funds in all cases where it is determined by the Administrator that there is insufficient capital otherwise tall H- able in the General Supply Fund.Advances of funds also may be made by agreement between the requisitioning agencies and the Ad- ministrator.Where an advance of funds is not made, the General Services Administration shall be reimbursed promptly out. of funds of the requisitioning agency in accordance with accounting procedures approved by the Comptroller General: Provided, That in any case %v here payment shall not have been made by the requisitioning agency within forty-five days after the date of billing by the Administrator or the date on which au actual liability for personal property or services is incurred by the Administrator, which ever is the later, reim- burseme,it may be obtained by the Administrator by the issuance of transfer and counterwarrants, or other lawful transfer documents, supported lir itemized invoices. (e) The General Supply Fund shall be credited with all reimbursements, advances of funds, and refunds or recoveries relit ing to personal property or services procured through the fund, including the net. proceeds of disposal of surplus personal property procured through the fund and receipts from carriers and others for loss of, or damage to, personal property procured through the fund; and the same are liereby reappropriated for the purposes of the fun.d (d) [Repealed.] (e) The Comptroller General of the United States shall make an annual audit. of the General Supply Fund as of June 30, and there shall be. covered into the United States Treasury as miscellaneous, receipts any surplus found therein, all assets, liabilities, and prior losses considered, above the amounts transferred or appropriated to establish and maintain said fund, and the Comptroller General shall report. to the Congress annually the results of the audit, together with such recommendations as he may have regarding the status and operations of the fluid. (f) Subject to the requirements of subsections (a) to (c), inclusive, of this section, the General Supply Fund also may be used for the procurement of personal property and 'impersonal services authorized to be acquired by mixed-ownership Government corporations, or by the municipal' government of the District of Columbia, or by a requisitioning non Federal agency when the function of a Federal agency authorized to procure for it is transferred to the General Services Administration. (g) Whenever any producer or vendor shall tender any article or commodity for sale or lease to the General Services Administration or to any i;rocurement authority act ing under flue direction and control of the Administrator pursuant to this Act, the Adminisrat or is authorized in his discretion, with the consent, of such producer or vendor, to cause to he conducted, in such inanner as the Administrator shall 75 AUTOMATIC DATA PROCESSING EQUIPMENT 73 specify, such tests as he shall precribe either to determine whether such article or commodity conforms to prescribed specifications and standards, or to aid in the development of contemplated specifications and standards. When the Administrator determines that the making of such tests will serve predominantly the interest of such producer or vendor, he shall charge such producer or vendor a fee which shall be fixed by the Administrator is such amount as will recover the cost of conducting such tests; including all components of such cost. determined in accordance with accepted accounting principles. When the Administrator determines that the making of such tests will not serve predominantly the interest of such producer or vendor, be shall charge such producer or vendor such fee as he shall determine to be reasonable for the furnishing of such testing service.All such fees collected by the Administrator may be deposited in the general supply fund to be used for any purpose authorized by subsection 109(a) of this Act.. SEC. 110. There is hereby authorized to be established on the books of the Treasury, a Federal telecommunications fund, which shall be available without fiscal year limitation for expenses, including personal services, other costs, and the procurement by lease or purchase of equipment and operating facilities (including cryptographic devices) necessary for the operation of a Federal telec( mmunciations system, to provide local and long-distance voice, teletype, data, fac- simile, and other communication services. There are authorized to be appropriated to said fund such sums as may be required which, together with the value, as determined by the Administrator, of supplies and equipment. from time to time transferred to the Adminis- trator under authority of section 205 (f),less any liabilities assumed, shall constitute. the capital of the fund : Provided, That said fund shall be credited with (1) advances and reimbursements from available appropriations and funds of any agency (including the General Serv- ices Administration), organization, or persons for teleconummicat ion services rendered and facilities made available thereto, at rates determined by the Admin istrat or to approximate the cost thereof met by the fund ( including depreciation of equipment, provision for accrued leave, and where appropriate, for terminal liability charges and for amortization of installationion costs, but excluding, in the determination of rates prior to the fiscal year 1906, such direct operating expenses as may be directly appropriated for, which ex:penses may be charged to the fund and covered by advances or reimbursements from such direct appropriations) and (2) refunds or recoveries resulting from operations of the fund, including the net proceeds of disposal of excess or surplus personal property and receipts from carriers and others for loss of or damage to property : Provided further. That following the close of each fiscal year any net income, after making provision for prior year losses, if any, shall lie transferred to the Treasury of the United States as miscellaneous receipts.

AUTOMATIC DATA PROCESS= EQUIPMENT Sec. 111. (a) The Administrator is authorized and directed to Co- ordinate and proride for the economic and efficient pa whose. leaRe, and maintenance of aatomotic data yiroceNsiuri t l,y Folerat agencis. 74 AUTOMATIC DATA PROCESSING EQUIPMENT (b) (1) Automatic data processing equipnwt suitable for efficient and effective use by Federal agencies shall be provided by the Ad- ministrator through purchase, lease, transfer of equipment from other Federal agencies, or otherwise, and the Administrator is authorized and directed to provide by contract or otherwise for the maintenance and repair of such equipnent. In carrying out his responsibilities under this section, the Administrator is authorized to transfer automatic data processing equipment between Federal agencies, to provide for joint utilization of such equipment by two or more Fed- eral agencies, and to establish and operate equipment pools and data processing centers for the use of two or more such agencies when necessary for its mast efficient and effective (2) The Administrator may delegate to one or more Federal agencies authority to operate automatic data processing equipment pools and au tonm tic data processing centers, and to lease, purchase, or nuzin- tain individual automatic data processing systems or specific units of equipment, including such equipment used in automatic data. processing pools and automatic data processing centers, when such action is determined by the Administrator to be necessary for the econom and efficiency of operations, or when such action is essential to national defense or nalloguil security.The Administrator may delegate to one or more Federal agencies authority to lease, purchase, or maintain, automatic data processing equipment to the extent to which he determines such action to be necessary and desirable to allow for the orderly implementation of a program, for the utilization, of such equipment. (c) There is hereby authorized to be established on the books of the Treasury an automatic data processing fund, which shall. be, available without fiscal year limitation for expenses, including personal services, other coats, and the procurement by lease, purchase, transfer, or otherwise of equipment, ntintenance, and repair of such equipment by contract or otherwise, necessary for theefficient coordination, operation, utilization of such equipment by and for Fed- i! pal agencies: Provided, That a report of equipment inventory, utili- atimi, and acquisitions, together with an account of receipts, d'isbume- tn ents. ruin Iran sfe Ps to vi iscell a worts recel p Is, under this «utho riz« lion shall be made annually in. conneetion goith the budget estimates to the Director of the I; eiream of the Budget and to the Congress, and the inclusion in appropriation acts of provisions regulating the operation of the automatic data processing fund, or limiting the expenditures t.heref root, is hereby authorized. (d) There are authorized to be appropriated to said fundRuchRums (1.9 m'/ be required which. together with the value, as determined by the Administrator. of supplies and equipment from time to time trans - ferred to the Administrator, shall constitute the capital of the fund: Pro vided, That said fund shall be credited .with (1) advanees and re- imbrsements from available appropriations and funds of any agency (including the General Services Administration), organization, or AUTOMATIC DATA PROCESSING EQUIPMENT 75 contractor utilizing such equipment and services rendered them, at rates determined by the Administrator to approximate the costs thereof met by the fund (including depreciation of equipment, provision for accrued leave, and for amortization of installation costs, but excluding, in the determination of rates prior to the fiscal year 1967, such direct operating expenses as maybe directly appropriated for, which expenses may be charged to the fund and covered by advances or reimbursements from such direct appropriations) and (2) refunds or recoveries resulting from, operations of the fund, including the net proceeds ,:',7- posal of excess or surplus personal property and receipts from carriers aml others for loss of or damage to property: Pro-ided f urther, That following the close of each fiscal year any net income, after making 7n.ovisions for prior year losses, if any, shall be transferred to the Treasury of the United States as miscellaneous receipts. (e) The proviso following paragraph (4) in, section 201(a) of this Act and the provisions of section 602(d) of this Act shall have no application in the administration of this section. No other provision of this Act or any other Act, which is inconsistent with the provisions of this section shall be applicable in the administration, of this section. (f) The Secretary of Commerce is authorized (1) to provide agencies., and the Administrator of General Services in the exercise of Ow, authority delegated in this section, with scientific and technological advisory services relating to automatic data processing and related systems, (Ind (2) to make appropriate recommendations to the Presi- dent relating to the establishment of 'uniform Federal automatic data proeess.ing standards.The Secretary of Commerce is authorized to undertake the necessary research in the sciences and technologies of automatic data processing computer and related systems, as may be required under provisions of this subsection. (g) The authority conferred upon the administrator and the Sec- etary of Commerce by this section shall be exercised subject to direction by the President and to fiscal and policy control exercised by the BUreall of the Budget.Authority so eon, erred upon the Adminis- trator shall not be so construed, as to impair or interfere with the determination by agencies of their individual automatic data processing ego; placid requirements, including tlw development of specifieations for and the selection of the types and configurations of equipment needed.The Administrator shrill not interfere with, or attempt to control in. any leay, the use made of outomat ie data processing equi p- ment or cmn ponents !hereof by any agency.The Administrator shall prochle adequate not ice to all, agencies and other users concerned with respect to each proposed determination specifically affecting them, or be automatic data processing equipment or components used b!/ them. In. MP absence of mutual agreement between the Administrator and the agency or user concerned, such. proposed, determinations shall, be subject to review and decision by the Bureau of the Budget unless the President otherwise directs. ADDITIONAL VIEWS Apparently there has been no specific request from the President for this legislation but it is our understanding that he has expressed no objection to it. However, there is no question that there is a need for the legislation.In a series of about 100 audit reports since 1959 the General Accounting Office has pointed to the great waste resulting from the present management of automatic data processing in Government, Three years of active investigation by this committee have persuaded us of the necessity for adoption of a coordinated program for the management of these resources. That there is such a need is a sad commentary on the ability of the administration to cope with the problem. The coordinated administration of automatic data process- mg in Government could surely have been handled by Executive order. Be that as it may, the undersigned are in accord with the overall objectives of the legislation.Annual expenditures by the Govern- ment for automatic data processing now exceed $3 billion and are expected to continue to increase for the foreseeable future.Whether o: not the committee should have adopted amendments which elimi- nate from the application of the bill those contractors who perform services on behalf of the Government, is another matter.Specific - all: those amendments are the following: On page 2, line 1, delete the following: ", or at the expense of,". On page 5. line D., delete the following: "and other users". On page 6, line 1, delete the followings: "or user". These amendments were based on the representations of the aerospace industry .favoring the limitation accomplished by these amendments. Sixty-one companies comprising Minos..., 100 percent of the aerospace industry, speaking through their trade organization the Aerospace Industries Association of America, Inc., adopted a resolution by unanimous vote of their hoard of directors dated April 16, 1905, recommending that the legislation he amended to exclude contractor equipment from its purview.This resolution expressed the position of such companies as North American Aviation, Lockheed Aircraft, General Dynamics. General Precision. Westinghouse Elec- tric, Douglas Aircraft, 13 oeing, General Motors, Avco, Thiokol Chem- ical, lfercules Powder, Sperry-Rand, and about 45 others.This resolution was forwarded to the committee with an accompanying letter dated April 16,1905. In addition to the aerospace industry, the Electronic Industries Association, composed of over 301) of the leading electronic firms of this country,including- IBM, RCA, LittonIndnstries, Western Electric, and others, also went on record in opposit ion to the present bill unless ainended in the manner indicated. The Indust ries' persuasive arrinnents were presented in the full committee meeting and the amendments were adopted. We found 76 AUTOMATIC DATA PROCESSING EQUIPMENT 77 these arguments too plausible to he completely ignored and we voted for the amendments. Ilowever, our vote was less an endorsement, of ally industry position than it was a vote to post pone the inclusion of private contractors under such legislation until the points of differ- el ice can be resolved or until their views are more thoroughly examined in the appropriate forumcommittee hearings.We contend that when a major step such as this is taken and where it directly affects a given industry, it should be taken only after full discussion of the industry's viewpoint. We are at a loss to understand why, if this legislation means as much to the industries and to the contractors as t liey say, they did not come in and test ify. As reia,:ed, a billion dollars tvorth of equipment,. paid for with t ax funds is outsidetluscope of this bill and the potehthd savings o the taxpayer have 'teen reduced accordingly. The hill in its present form now applies only to Government, agencies and to the extent, it does so, we favor it.I lowever, we urge immediate study of the industries' viewpoint and the inclusion of contractors under the legislation to whatever degree may be indicated.It is our hope that. such a determination can he made prior to consideration of tltis bill by the llouse so that the economies to be effected will not be unduly delayed, .T. Vi,oltuNcr, P. pore= P. (haviN. 1)ELISERT L. LATTA. 1)oNALD Rumsynim. 1VILLLA:n Jolt's N. Eittnxisoilx. Jong IV. WrYIThER. 0