GAO finds bias in U.S. agencies' computer buys

September 14, 1990|By Leslie Cauley

Many federal agencies are unable or unwilling to follow the rules when buying mainframe computers, which has thwarted competition for more than 80 percent of all mainframe purchases, the General Accounting Office told a House panel yesterday.

"Our governmentwide statistics show that 82 percent of all mainframe procurements limit competition in some way," Milton J. Socolar, special assistant to GAO's comptroller general, told the House Government Operations Committee yesterday.

The biggest beneficiaries of the bias, he said, are International Business Machines Corp. and companies that produce IBM-compatible equipment.

IBM is the dominant vendor of mainframe computers, the workhorses of the computer world, which typically cost several million dollars each. They are used for high-speed number crunching and for performing complicated processing tasks.

Most government mainframe procurements require that new computer equipment be compatible with existing systems, he said.

According to the GAO review, which is based on direct responses from agencies, about 64 percent of all contracts that call for some type of compatibility with existing computers specify IBM-type equipment.

The GAO estimate was based on a review of $2 billion in mainframe purchases by 35 agencies over a three-year period. GAO has prepared or is preparing reports on eight agencies: the Health and Human Services Department, the Commerce Department, the Agriculture Department, the Defense Department, the National Aeronautics and Space Administration, the Air Force, the Army and the Navy.

Mr. Socolar indicated that incompetence among contracting officials -- including a general lack of training, experience or knowledge in procurement procedures -- has contributed to the current restrictive environment for mainframe computer procurements. He also cited the General Services Administration for not exercising enough oversight contracts in recent years.

That view was shared by Richard G. Austin, the newly installed administrator of GSA, who also testified yesterday. As the federal housekeeping agency, GSA is responsible for overseeing all purchases by the government.

GSA is trying to correct a problem that was created during the 1980s, when GSA started giving away contract oversight authority to agencies "with the attitude that we can't get blamed if it blows up," he said in an interview yesterday.

"Now we're trying to go back to try to fix the problem," Mr. Austin said.

To help resolve the situation, GSA is beefing up contract reviews and assigning more staff members to contract oversight, he told the House panel yesterday.

Representative John Conyers Jr., D-Mich., the committee chairman, said GAO's conclusion indicates that "competition in federal mainframe computer acquisition is a myth."

He said companies that try to compete against IBM for federal contracts are hit particularly hard.

"We have found that four federal agencies -- HHS, Treasury, Agriculture and NASA -- as so heavily dominated by IBM that it must be discouraging for IBM's competitors to even try," he said.

Without making a case-by-case determination of whether restrictions on competition were unjustified, GAO's Mr. Socolar noted that "when competition is unnecessarily restricted, the government may pay too much for what it buys and may not obtain the best solution for meeting its needs."

Under existing regulations, agencies are permitted to restrict contracts only when that is necessary to meet their needs.

However, the letter of the law isn't always followed, Mr. Socolar said.

In August 1987, for example, the Navy awarded a $26.7 million mainframe contract to IBM to support its electronic payroll system. The original contract called for the new system to run at 10 sites.

A review by GAO, however, found the Navy had disregarded "good acquisition practices" and grossly overestimated its needs in the process.

The Navy has since stopped delivery of computers under that contract and decided to use existing equipment. It also has scaled back the number of sites for the new system from 10 to one.

Another review by GAO found similar flaws with a 10-year, $1.5 billion computer project for the Federal Aviation Administration, Mr. Socolar said.

Following a review, GAO recommended that the contract be canceled. The FAA is considering that recommendation, Mr. Socolar said.

Earlier this year, Mr. Conyers' committee took the Navy and IBM to task in a series of hearings over the Navy's alleged bias in favor of IBM equipment.

Those hearings have since led to closer scrutiny by GAO of contract procedures.

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