    Government Printing: Comparison of DOD and GPO Prices for Printing and
    Duplicating Work (Letter Report, 02/17/95, GAO/NSIAD-95-65).

    GAO examined the prices charged to customers for printing and
    duplication work at the Government Printing Office (GPO) and the Defense
    Printing Service (DPS). GAO found that GPO prices for printing work were
    about 9 to 11 percent lower than those of DPS. For printing requisitions
    of more than $500--about 78 percent of the printing dollars--GPO's
    prices were about 21 percent lower than those of DPS. For requisitions
    of $500 and less--22 percent of the total printing dollars--DPS' prices
    were about 31 percent lower than GPO's. GAO estimates that overall, GPO
    prices for DPS' fiscal year 1994 printing workload would have been about
    $2.4 million lower than those of DPS. DPS prices for duplicating
    requisitions were about four to five percent lower than GPO prices. For
    those requisitions priced at more than $500, there was about 0.4-percent
    difference favoring GPO, and for those of $500 or less, the difference
    was about 57 percent in favor of DPS. GAO estimates that overall, DPS
    prices for the DPS fiscal year 1994 duplicating workload would have been
    about $9.3 million lower than the GPO prices.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  NSIAD-95-65
         TITLE:  Government Printing: Comparison of DOD and GPO Prices for
                 Printing and Duplicating Work
          DATE:  02/17/95
       SUBJECT:  Printing costs
                 Government publications
                 Price adjustments
                 Cost analysis
                 Federal procurement
                 Contract costs
                 Information dissemination operations
                 Comparative analysis
                 Cost accounting
    IDENTIFIER:  Federal Printing Procurement Program
                 Defense Business Operations Fund

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    Cover
    ================================================================ COVER

    Report to Congressional Committees

    February 1995

    GOVERNMENT PRINTING - COMPARISON
    OF DOD AND GPO PRICES FOR PRINTING
    AND DUPLICATING WORK

    GAO/NSIAD-95-65

    Government Printing

    Abbreviations
    =============================================================== ABBREV

      DCI - data collection instrument
      DOD - Department of Defense
      DPS - Defense Printing Service
      GPO - Government Printing Office
      NCA - National Capital Area
      PRMIS - Printing Resources Management Information System

    Letter
    =============================================================== LETTER

    B-259522

    February 17, 1995

    Congressional Committees

    As set forth by the House report accompanying the fiscal year 1994
    Department of Defense (DOD) Appropriations Act and as requested by
    the former Chairmen of the Subcommittee on Defense and the
    Subcommittee on Legislative, House Committee on Appropriations, we
    reviewed issues related to the costs, prices, services, and
    operations of the Government Printing Office (GPO) and the Defense
    Printing Service (DPS).  Our April 1994 report addressed issues
    related to GPO and DPS costs, services, and operations.\1 In this
    report, we address the prices charged to customers for acquiring
    printing and duplicating work from those agencies.  Our objective was
    to determine whether there was a difference in the prices charged by
    the two agencies.  As stated in our April 1994 report, questions
    about the adequacy of DPS' cost information precluded a cost
    comparison of the agencies' operations.

    --------------------
    \1 Government Printing:  Legal and Regulatory Framework Is Outdated
    for New Technological Environment (GAO/NSIAD-94-157, Apr.  15, 1994).

       BACKGROUND
    ------------------------------------------------------------ Letter :1

    In our April 15, 1994, report, we reported that in recent years,
    controversy has arisen over the printing operations of various
    agencies.  This was because some agencies wanted to publish their
    work independent of GPO involvement.  This controversy is largely the
    result of significant advances in publishing technologies.  In
    presenting matters for congressional consideration, we noted that the
    framework of laws and regulations used to manage the government's
    publishing activities has been in place for many years and now seems
    the appropriate time for a reassessment.  We further stated that as
    Congress continues to review the various legislative proposals, it
    may wish to consider an alternative framework built on sound business
    processes and changing publishing technologies.  Appendix I is an
    extract from our April 15, 1994, report.

    By law, GPO, a legislative branch agency, provides printing-related
    services to all branches of the federal government--either by
    producing the work in-house or contracting with private vendors.  For
    the most part, GPO uses its in-house resources to produce
    printing-related work for Congress, while it contracts with the
    private sector to provide similar services for executive branch
    agencies.  In fiscal year 1994, GPO provided $724.4 million in
    printing-related services for the government--$197.6 million through
    in-house resources and $526.8 million through commercial procurement.

    DPS is DOD's single manager for printing and duplicating operations.
    It was established in April 1992 when the printing-related operations
    of the military services and defense agencies were consolidated.  At
    its inception, DPS had an authorized staffing level of 3,694 persons
    and 350 printing-related facilities.  DPS has since reduced its
    infrastructure as DOD continues to downsize.  As of January 1995, DPS
    reported that it had 2,343 persons on its staff and 256
    printing-related facilities.  Under current procedures, DOD customers
    submit printing-related requirements to DPS, which satisfies most of
    these needs either through its in-house resources or through GPO
    contracts with the private sector.  In fiscal year 1994, DPS produced
    $220.4 million of work in-house and procured $177.4 million of
    work--$167.8 million of the latter was procured through the GPO.\2

    DPS sends the majority of its printing work to private vendors on
    contract to the GPO and maintains most of its duplicating work
    in-house.  For the most part, in-house work comprises relatively low
    dollar value work.  For example, in fiscal year 1993, 75 percent of
    the DPS' duplicating requisitions were priced under $103, and about
    50 percent were under $28.

    The prices DOD customers pay for their printing and duplicating work
    vary according to the nature of the work, the provider of the work,
    and the business arrangements in place to provide it.  For work
    performed in DPS facilities, DPS uses a uniform nationwide pricing
    schedule that is based on the various production processes and costs
    associated with producing a product.  Customers are charged schedule
    prices, which are adjusted annually, and the revenue is used to
    offset costs associated with producing the work.  Prices are adjusted
    throughout the year to reflect changes in paper prices.  For work
    procured under GPO contracts, customers are usually charged a private
    vendor's fee and administrative surcharges assessed by GPO and DPS.
    Contractor prices are largely dictated by the economic forces of the
    marketplace.  In those cases in which GPO decides to produce the work
    in-house rather than contract for it, GPO most often prices the work
    at a level to cover the production costs.  However, in some cases, it
    offers discounts and may charge the prevailing commercial rate.

    By comparing prices charged to the customer rather than costs of the
    services provided, our analysis took the perspective of the DOD
    customer who is interested in obtaining a particular service at the
    lowest price.  To determine the extent to which price differences
    reflect differences in costs would require a detailed analysis of
    GPO's and DPS' cost accounting systems.  As discussed in our April
    1994 report on government printing issues, we attempted but could not
    make a meaningful comparison of GPO and DPS costs because (1) the two
    agencies capture costs differently and (2) there are concerns
    regarding the completeness, accuracy, and reliability of DPS' cost
    accounting system.

    --------------------
    \2 The DPS in-house figure includes $29.6 million of cost-per-copy
    contract work and self-service copying.

          PRICE COMPARISON METHODOLOGY
    ---------------------------------------------------------- Letter :1.1

    Whether DOD customers would be best served by having their printing
    and duplicating work produced in DOD facilities or provided by GPO
    has been the subject of debate for many years.  Several price
    comparison studies have been performed in recent years; however,
    because of perceived or actual limitations in the conduct of these
    studies, none has been widely accepted.

    As we developed our price comparison methodology, we took into
    account the criticisms of prior studies, the concerns of GPO and DPS,
    and the comments of external printing consultants.  Our methodology
    was (1) based on a representative sample of DPS' $221 million fiscal
    year 1993 nationwide in-house workload, (2) designed to capture
    prices based on existing business conditions, and (3) reviewed by the
    consultants.  During the conduct of the study, we also implemented
    various controls to minimize the possibility of agency bias on the
    results.

    Once we developed our sampling framework, our overall conceptual
    approach for performing the price comparison was to have DPS send the
    sample requisitions actually received from its customers during
    fiscal year 1994 to GPO, who for the most part contracted to have the
    work done.  The contractors actually performed the work and billed
    GPO for that work.  We then took the price charged by GPO to DPS'
    customers and compared it with the price DPS estimated it would have
    charged to have performed the work.  The results of this sample
    comparison were then projected against DPS' fiscal year 1994
    workload.

    Our price comparison was based on a statistically representative
    sample of 303 printing and 685 duplicating DPS customer-requested
    requisitions produced between April and September 1994.
    Collectively, these requisitions represented 327 printing and 1,193
    duplicating products.  We based our conclusions on a dollar-weighted
    sample of printing and duplicating requisitions.  The fiscal year
    1994 customer-requested products submitted by DPS plant officials
    were based upon criteria that we established from the products
    described on a set of validated fiscal year 1993 requisitions.

    The submissions were reviewed by an in-house panel of printing and
    methodology specialists and the consultants.  As DOD customers
    routinely submitted requisitions, DPS officials chose those
    requisitions that were similar to our criteria and, rather than
    producing the work in DPS facilities, sent it to GPO, who largely had
    the work produced by contractors.  Plant officials sent us the
    documentation associated with this work.  Work passing our panel's
    and consultants' review was used as the sample for this study.  The
    GPO bills for our sample were then compared with the prices DPS would
    have charged if it had done the work in-house.  Appendix II contains
    a technical description of our methodology and lists the external
    consultants we used.

       RESULTS IN BRIEF
    ------------------------------------------------------------ Letter :2

    A meaningful cost comparison of the services provided by GPO and DPS
    cannot be made because these agencies capture costs differently and
    there are longstanding questions regarding the reliability of DPS'
    cost accounting system.  Consequently, as agreed, we used price as a
    comparative measure.  We recognize that a price comparison does not
    show which agency's services are more economical to the government.
    Instead, it shows what customers are paying for services.  Table 1
    shows the DPS' 1993 workload and the results of our price comparison
    projected to DPS' 1994 workload.\3

                               Table 1

                    Analysis of GPO and DPS Prices

                        (Dollars in millions)

    Dollar value           Number of                          By
    of            Dollar  requisitio                  By  dollar
    requisitions       s          ns  Favors     percent     s\a
    ------------  ------  ----------  ------  ----------  ------
    Printing
    ------------------------------------------------------------
    Over $500      $19.5      11,000     GPO     21.0 to    $4.2
                                                    21.6
    $500 or less     5.4      51,000     DPS     30.5 to     1.7
                                                    31.3
    ============================================================
    Total          $24.9      62,000     GPO      9.9 to    $2.5
                                                    10.1

    Duplicating
    ------------------------------------------------------------
    Over $500     $178.0      25,700     GPO  0.6 to 0.8    $1.3
    $500 or less    17.6     286,800     DPS     57.0 to    10.1
                                                    57.6
    ============================================================
    Total         $195.6     312,500     DPS  4.0 to 5.0    $8.7
    ------------------------------------------------------------
    Note:  The terms "printing" and "duplicating" represent our
    categorization of DPS' workload.  See appendix II.

    \a Totals may not add due to rounding.

    During our review, GPO officials pointed out that they believed if
    more use were made of term contracts rather than one-time buys, there
    would be a potential for lower contract prices through GPO.  Term
    contracts provide for the purchase of specific products or classes of
    products from vendors during a specified period of time.  Our
    analysis included a post-stratification of the 1994 DPS sample
    products to find out the extent to which DPS' use of term contracts
    resulted in savings to DPS customers.  We found that GPO contractor
    prices were significantly--about 37 percent--lower than DPS printing
    prices.  However, we did not find significant differences between
    GPO's duplicating term contracts and DPS' prices.

    GPO provided price estimate information based on term contracts used
    by DOD or other federal agencies.  This information indicated that,
    in most cases, these term contract prices would be lower than DPS'
    prices.  However, whether suitable term contracts could be
    established to handle the DPS workload and satisfy specific customer
    needs (e.g., quick turnaround) at the projected prices is uncertain.

    Lastly, because our study was based on a fiscal year 1994 sample, it
    represents the situation for that period.  Relative price differences
    will change as prices are adjusted by GPO, GPO contractors, or DPS.
    The magnitude and direction of the changes are difficult to predict
    because of uncertainty in the marketplace.  Recent information shows
    that GPO and DPS will both experience price increases during fiscal
    year 1995.

    --------------------
    \3 For purposes of our analysis, we assumed the workload mix was the
    same in 1994 as it was in 1993.

       DPS AND GPO PRICES UNDER
       EXISTING CONDITIONS
    ------------------------------------------------------------ Letter :3

    Our analysis showed that, under conditions existing during our sample
    period, GPO's prices for printing work were about 10 percent lower
    than those of DPS'.  For printing requisitions more than $500, GPO's
    prices were about 21 percent lower than DPS' prices.  For
    requisitions $500 and less, DPS' prices were about 31 percent lower
    than GPO's.  We estimate that, in aggregate, GPO's prices for DPS'
    fiscal year 1994 printing workload would have been about $2.5 million
    lower than those of DPS'.

    DPS' prices for duplicating requisitions were about 4 to 5 percent
    lower than GPO's prices.  For those requisitions priced over $500,
    there was about 0.7 percent difference favoring GPO, and for those
    $500 or less the difference was about 57 percent in favor of DPS.  We
    estimate that, in aggregate, DPS' prices for its fiscal year 1994
    duplicating workload would have been about $8.7 million lower than
    the GPO's prices.

          PRINTING
    ---------------------------------------------------------- Letter :3.1

    Our analysis of printing prices was based on a sample of 303
    requisitions representing 327 products that we categorized as
    printing.  The sample comprises large (more than $500) and small
    (equal to or less than $500) dollar requisitions.  About 96 percent
    of the work was done through private vendors on contract to GPO; the
    remainder was produced in one or more of GPO's facilities.  Although
    we could not conclusively determine the major factors for the price
    difference for printing, our results show that large dollar
    requisitions were about 21 percent lower at GPO, representing about
    78 percent of the printing dollars.  However, the price difference
    for small dollar requisitions showed that DPS' prices were about 31
    percent lower.  About 82 percent of DPS' fiscal year 1993 workload
    for printing was for small dollar requisitions, but this category
    contained about 22 percent of the total printing dollars.

          DUPLICATING
    ---------------------------------------------------------- Letter :3.2

    Our analysis of duplicating prices was based on a sample of 685
    requisitions representing 1,193 products that we categorized as
    duplicating.  Like printing, the sample comprises large and small
    dollar requisitions, many of which required quick turnaround times.
    Our analysis of DPS' fiscal year 1993 workload for duplicating showed
    that small dollar requisitions accounted for about 92 percent of the
    requisitions, but 9 percent of the duplicating dollars.  Large dollar
    requisitions accounted for 8 percent of the requisitions, but 91
    percent of the duplicating dollars.

    For low dollar requisitions, DPS' prices were about 57 percent lower
    than GPO's prices.  For high dollar requisitions, GPO's prices were
    about 0.7 percent lower than the DPS' prices.

       GPO BELIEVES THAT USING TERM
       CONTRACTS WOULD RESULT IN LOWER
       GPO PRICES
    ------------------------------------------------------------ Letter :4

    During the course of our review, GPO officials stated that they
    believed that making maximum use of term contracts could provide DPS
    with significantly lower prices for its printing and duplicating
    work.  GPO officials told us that about 75 percent of its work for
    government agencies is performed under term contracts.  According to
    GPO officials, vendors may not have charged the favorable rates
    available on term contracts for the one-time buys that were part of
    our study.  Although not part of our price comparison methodology,
    GPO asked that we include in this report a discussion of how the use
    of long-term contracts might affect contractors' prices.

    During our test period, about 46 percent of the printing products and
    41 percent of the duplicating products produced by GPO contractors
    were completed under term contracts.  The remaining products were
    completed using one-time buys.  Because GPO believes that term
    contracts with its vendors result in substantial savings to the
    government, we reanalyzed our data to try to detect these savings.
    For printing, our data supported the conclusion that savings could
    accrue.  We found a significant difference-- about 37
    percent--between GPO's contractor prices under printing term
    contracts and DPS' printing prices.  However, we did not find
    significant differences when duplicating term contracts were used.

    Under another approach, which is the most optimistic scenario, GPO
    repriced our sample requisitions using prices from its term contracts
    in existence across the country--even though they may have been for
    agencies other than DOD.  We examined GPO's repricing effort to
    determine the relative level of GPO's prices versus those of DPS'.
    We found that GPO's prices were lower than DPS' prices for 940 of
    1,157 sample items that GPO repriced and were in our analysis.
    Moreover, GPO's prices resulting from the repricing effort were often
    lower than actual GPO's prices for sample items procured under GPO
    term contracts during our study.  This occurred in 495 of 630 cases
    where a term contract was used.

    We selectively verified orders repriced by GPO and found a number of
    errors.  Although these errors would not appear to materially alter
    the supposition of lower prices, the errors do raise questions about
    the relative magnitude of the prices.  Some of the deficiencies we
    identified included

    minor errors in pricing various printing or duplicating processes,

    omission of applicable GPO surcharges, and

    misapplication of selected contracts for repricing estimates.

    Lastly, whether suitable term contracts could be established to
    handle DPS' workload and satisfy specific customer needs (e.g., quick
    turnaround) at competitive prices is uncertain.  GPO was unable to
    reprice 48 of the sample requisitions because there were no existing
    term contracts in effect that were appropriate for pricing purposes.
    In previous price comparison studies and in DPS' comments on our
    current analysis, the use of GPO's prices based on existing term
    contracts with other agencies was questioned.

       RECENT DPS AND GPO VENDOR PRICE
       INCREASES
    ------------------------------------------------------------ Letter :5

    Our analysis was based on DPS' and GPO's prices for work during the
    latter half of fiscal year 1994 and, therefore, represents a
    point-in-time comparison.  Recent price increases taking effect
    during fiscal year 1995 could change the relative price difference
    between GPO- and DPS-provided work.  The magnitude and direction of
    the difference is difficult to predict, however, because of
    uncertainty in the marketplace.

    In October 1994, DPS increased its overall prices by 18.5 percent and
    its surcharge for processing work to GPO from 1.83 percent to 5.5
    percent.  According to DPS officials, the increases were intended, in
    large part, to offset prior years' printing-related operation losses.
    DPS is part of the Defense Business Operations Fund--a revolving fund
    that is used to fund operations for DPS and many other DOD
    activities.

    In an August 1994 correspondence to the Joint Committee on Printing,
    GPO forecasted that GPO prices obtainable through private contractors
    would most likely increase by about 3.8 percent during fiscal year
    1995.  However, in October 1994, GPO officials advised agencies that
    private sector price increases may be greater.  This was because of
    substantial paper cost increases.  GPO officials stated that prices
    in new term contracts involving significant amounts of paper could
    experience 20 to 40 percent price increases.  Paper cost increases
    may also affect DPS' prices, because DPS can adjust the price it
    charges its customers during the fiscal year to reflect paper price
    increases.

       AGENCY COMMENTS AND OUR
       EVALUATION
    ------------------------------------------------------------ Letter :6

    In its official comments on a draft of this report, DOD agreed with
    our audit methodology, execution, and conclusions.  The comments are
    included as appendix III.

    GPO, in its official comments, did not agree with many aspects of our
    report and the methodology we used to perform our work.  The comments
    are reprinted in their entirety as appendix IV.  GPO commented that
    our draft report contained material deficiencies that provided an
    undue bias in favor of DPS and that understated the
    cost-effectiveness of the GPO Printing Procurement Program and its
    private sector printers.  GPO cited a number of methodological
    concerns (such as our reliance on what GPO characterizes as an
    incomplete and questionable DPS database) that it believed raise
    questions about the reliability of our work.  Further, GPO stated
    that we did not always exercise due professional care during the
    planning and performance of the study.  To illustrate this point, GPO
    stated that we (1) allowed DPS to select the sample for the study,
    (2) accepted sample jobs outside the criteria established for
    selecting the sample, (3) allowed DPS to control the timing and means
    for delivering sample jobs to GPO, and (4) allowed DPS to provide the
    source documentation for the comparative price analysis.

    We disagree with GPO's primary concerns.  We believe that our draft
    report does not contain material deficiencies and that we exercised
    all due care in the conduct of our work.  Because of the sensitivity
    and continuing controversy surrounding various printing and
    duplicating management issues, we exercised extreme care in the
    planning and conduct of our work in order to provide results that are
    indicative of real world conditions.  With regard to GPO's specific
    concerns, we disagree for the reasons as detailed in the succeeding
    paragraphs.

    We did not, as GPO stated, use data from a questionable database
    without first testing the reliability of the data we needed for our
    study.  For example, in using the fiscal year 1993 DPS management
    information database as a baseline for our work, we selected 440
    printing and 300 duplicating automated requisition entries and
    subsequently compared the associated automated data with data found
    on the corresponding hard-copy requisitions.  In over 90 percent of
    the cases, the data were appropriate and we judged them to be
    reliable for the purposes of our study.

    We disagree that DPS selected the sample for our study and that we
    accepted many jobs that, GPO states, were not "twins" based on our
    job specification criteria.  If DPS were permitted to select jobs
    without proper controls, it would have created an opportunity for
    unwanted bias.  To avoid this, we had DPS plant officials nominate
    candidate jobs for our sample, using preestablished criteria that we
    provided to them.  The criteria provided to DPS were never intended
    to restrict DPS to obtaining exact matches, or twins as GPO states.
    Certain specifications (e.g., major production processes used,
    estimated price, classification level, and time available to produce
    the job) were key to DPS' sample nomination process.  Other criteria
    (e.g., technical job characteristics such as stitching) were provided
    as guidelines for DPS to use in attempting to nominate products that
    were similar, but not necessarily a direct match.  We subsequently
    had DPS' nominations reviewed by two panels to ensure that the
    nominations (1) fit within the statistical model for our work and (2)
    did not have any technical printing requirements or other
    considerations that would unduly bias either agency.  One panel
    consisted of internal printing and methodology specialists, while the
    other comprised external printing consultants.  As a result of these
    reviews, we rejected about 9 percent of DPS' sample candidates.  For
    rejected cases, we asked DPS to submit additional candidates, which
    were subjected to the same review process.

    With regard to GPO's statement that DPS controlled the timing and
    means of delivering sample jobs to GPO, we believe we exercised
    proper oversight of the process.  We instructed DPS to use its normal
    business procedures to obtain its work through GPO so that our
    comparison was realistic.  To ensure that DPS did not unduly delay
    the delivery of jobs to GPO, we examined, through the panel process,
    the timing (DPS receipt of a customer request and subsequent
    submission to GPO) for each job in our sample.  We also conducted a
    separate subsample analysis to further examine the issue.  Our
    analysis showed no systemic bias in the process.  As to the means of
    delivering jobs to GPO, we have no indication that DPS intentionally
    biased the process, given the requirement to meet the customers'
    request dates.

    GPO stated that DPS provided the source documentation to us for the
    comparative analysis.  However, while DPS did provide much of the
    data related to the customer requisitions, DPS price estimates, and
    GPO billings, we also obtained source documentation from GPO.  We
    examined and verified the source documentation where reasonable and
    where we determined the risk of bias was high.  For example, we had
    external printing consultants review DPS' price estimates.  To verify
    the GPO invoice prices provided by DPS, we extracted GPO bills from
    database files provided by GPO.  We also performed a quality
    assurance analysis to examine cases where it appeared that
    discrepancies in our data may exist.  Where errors were detected, we
    made the appropriate corrections in our database.

    GPO also questioned our presentation of information in the report.
    For example, GPO believes that our interchangeable use of such terms
    as "requisitions," "jobs," and "orders" in our draft report created
    confusion.  Further, GPO stated that our draft methodology did not
    sufficiently disclose what we actually did during the review.
    Because of GPO's apparent misunderstanding of our methodology, we
    have included a more technical description of our methodology and
    clarified our report presentation.

    GPO also questioned whether it was appropriate for us to have GPO
    comment on our report prior to the completion of all audit work.
    While we agree that this situation was not ideal, we did not release
    the draft report for comment until we had sufficient data to project
    the results of our work.  The small amount of additional data
    collected after we released our draft report for comment did not
    materially affect the results of our study.

    As to specific concerns noted in GPO's official comments, we have
    annotated the comments and have provided our views following the
    reprint of GPO's comments in appendix IV.

    ---------------------------------------------------------- Letter :6.1

    We are sending copies of this report to the Secretary of Defense, the
    Public Printer of the United States, the Director of DPS, the
    Director of the Office of Management and Budget, and other
    appropriate congressional committees.  We will also make copies
    available to others upon request.

    The report was prepared under the direction of Donna M.  Heivilin,
    Director, Defense Management and NASA Issues, who can be reached on
    (202) 512-8412 if you or your staff have any questions.  Other major
    contributors are listed in appendix V.

    Henry L.  Hinton, Jr.

    List of Congressional Committees

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

    The Honorable Ted Stevens
    Chairman
    The Honorable Daniel K.  Inouye
    Ranking Minority Member
    Subcommittee on Defense
    Committee on Appropriations
    United States Senate

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

    The Honorable C.  W.  Bill Young
    Chairman
    The Honorable John P.  Murtha
    Ranking Minority Member
    Subcommittee on National Security
    Committee on Appropriations
    House of Representatives

    The Honorable Ron Packard
    Chairman
    The Honorable Vic Fazio
    Ranking Minority Member
    Subcommittee on Legislative
    Committee on Appropriations
    House of Representatives

    (See figure in printed edition.)Appendix I
    EXTRACT FROM OUR APRIL 15, 1994,
    REPORT ON GOVERNMENT PRINTING
    ============================================================== Letter

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    SCOPE AND METHODOLOGY
    ========================================================== Appendix II

    Debate continues as to whether DOD can save money by contracting its
    printing and duplicating work through GPO rather than producing it
    in-house.  Several studies have been conducted on this topic, but
    they do not support generalizable findings.  Accordingly, we set out
    to determine whether DOD customers would pay more or less to obtain
    printing and duplicating services through GPO and its private sector
    contractors rather than through DPS.

       STUDY APPROACH
    -------------------------------------------------------- Appendix II:1

    Our study is based on the printing and duplicating workload
    undertaken by DPS in response to customer requisitions received
    during fiscal year 1993.  Because it is requisition based, the study
    excludes consideration of that portion of DPS' workload associated
    with self-service or copy center operations.  Work performed in
    overseas plants is also excluded because GPO does not typically
    service those locations.  DPS' fiscal year 1993 workload is used to
    specify a statistically matched set of fiscal year 1994 requisitions.
    The difference between DPS' and GPO's fiscal year 1994 prices for
    this matched set serves as the basis for the study's price
    comparisons.

    Our work was conducted between September 1993 and January 1995 in
    accordance with generally accepted auditing standards.

          TERMINOLOGY DIFFERENCES
    ------------------------------------------------------ Appendix II:1.1

    In recent years, the proliferation of computers, laser printers, and
    other digital technologies has blurred the distinctions between
    printing and duplicating.  Today the terms are often used
    synonymously, but their precise definition has been the subject of
    disagreement within the printing community.  DPS, for example, may
    classify a piece of work as duplicating, while GPO might classify the
    identical product as printing.  Similarly, DPS and GPO frequently
    disagree about the production processes required to produce products
    at different quality levels.

    Our study is based on DPS' workload, and we used DPS' production
    classifications.  Accordingly, the projected price differences for
    printing or duplicating are expressed in terms of DPS'
    classifications.  Our price comparisons, however, are product-based.
    Thus, while DPS and GPO may disagree as to whether a particular work
    process should be classified as printing or duplicating, this study
    reports solely the price differences charged for products that the
    customer would perceive as identical.

          GEOGRAPHIC CONSIDERATIONS
    ------------------------------------------------------ Appendix II:1.2

    During our sample period, DPS comprised a headquarters and field
    activities located within eight areas.  DPS prices in-house work at
    the time a requisition for printing or duplicating is accepted using
    a standard rate schedule.  DPS uses this schedule to price each of
    the processes used to produce a job.  With the exception of paper
    prices, the rate schedule is identical for all areas and is updated
    on an annual basis.  Paper prices are set at the plant level and may
    vary throughout the year.

    GPO also has a headquarters and regional structure.  For executive
    agency printing and duplicating work, GPO usually contracts the work
    with local or regional commercial vendors.  Consequently, GPO's
    prices are affected by market conditions.  The price for identical
    work may vary between regions and, seasonally, within the same
    region.  The final invoice (including GPO's contract administration
    surcharge) is provided after completion of the work and receipt of
    the contractor's billing.

    GPO's regional boundaries do not coincide with the geographic
    boundaries of the DPS areas.  Thus, there is not a one-to-one
    relationship between a DPS area office and a GPO regional office.  A
    DPS area office may contract support from multiple GPO regions, and a
    single GPO region may support multiple DPS area offices.

          DEFINING DPS' FISCAL YEAR
          1993 WORKLOAD
    ------------------------------------------------------ Appendix II:1.3

    Members of the printing community often assert that every printing
    and duplicating product is unique.  Although the products may be
    unique, it is clear that there is a finite, countable sequence of
    production steps involved in their manufacture.  The identification
    of these sequences is the core of our statistical design.

    DPS' Printing Resources Management Information System (PRMIS) tracks
    requisitions and prices for 184 separate work processes that may be
    involved in providing customers with requested products.  We
    realigned DPS' fiscal year 1993 PRMIS data to reflect DPS' job
    pricing system--one that is designed to capture the prices charged
    for the various manufacturing processes used to produce a product.
    By tracking requisitions through the various processes, we were able
    to categorize DPS' overall fiscal year 1993 in-house workload into
    nine major production processes.  Table II.1 lists these processes
    and the revenue associated with them in fiscal year 1993.  Each of
    these major processes was further stratified to reflect additional
    production processes (e.g., stitching) and price strata.  In total,
    our study comprised 37 printing and 32 duplicating strata.

                              Table II.1

               DPS' Major Production Processes (Fiscal
                              Year 1993)

                        (Dollars in millions)

                                          Requisitio
                Major production process          ns       Price
    ----------  ------------------------  ----------  ----------
    Printing
    ------------------------------------------------------------
    1           10x15/11x17 press             38,503        $5.0
    2           Offset press 14x19 width      17,095         9.6
    3           Offset press 22x29/            3,675         5.8
                 22x34
    4           Offset press 35x45               896         2.0
    5           Two-color press 35x45            911         1.8
    6           Roll-fed 22x34                   116         0.5
    7           Thermo/envelope/                 999         0.2
                 letterpress

    Duplicating
    ------------------------------------------------------------
    8           Electrostatic                276,812       188.0
                 duplicating
    9           Offset duplicating            35,724         7.6
                 10x15/11x17
    ============================================================
    Total                                    374,731      $220.5
    ------------------------------------------------------------
    Note:  Overseas plant figures are excluded.

          VALIDATION OF DPS' PRMIS
          DATABASE
    ------------------------------------------------------ Appendix II:1.4

    We relied extensively on computer-processed data contained in the
    DPS' PRMIS database.  We assessed the reliability of the data by
    comparing them with data from fiscal year 1993 hard-copy
    requisitions.  This comparison was conducted using a statistically
    valid sample.  Table II.2 lists the sample sizes by major production
    process.

                              Table II.2

                    Sample Used to Validate PRMIS

                        (Dollars in millions)

                                          Requisitio      Sample
                Major production process          ns        size
    ----------  ------------------------  ----------  ----------
    Printing
    ------------------------------------------------------------
    1           10x15/11x17 press             38,503         123
    2           Offset press 14x19 width      17,095          93
    3           Offset press 22x29/            3,675          69
                 22x34
    4           Offset press 35x45               896          45
    5           Two-color press 35x45            911          35
    6           Roll-fed 22x34                   116          25
    7           Thermo/envelope/                 999          25
                 letterpress
    ============================================================
    Subtotal                                                 415

    Duplicating (National Capital and Western areas)
    ------------------------------------------------------------
    8           Electrostatic
                 duplicating
                National Capital Area         13,679          38
                Western Area                  94,056         112
    9           Offset duplicating
                 10x15/11x17
                National Capital Area            536          38
                Western Area                   7,426         112
    ============================================================
    Subtotal                                                 300
    ============================================================
    Total                                    177,892         715
    ------------------------------------------------------------
    Note:  Overseas plant work is excluded.

    With regard to printing, all fiscal year 1993 requisitions were
    grouped according to DPS' seven major printing production processes
    and stratified into 37 cells to reflect the influence of production
    line characteristics (major combinations of press requirements,
    offset plates, etc.) and requisition price (greater than $500 or $500
    and less).  Statistics for each cell were derived, and a hard copy of
    the original customer request was obtained for a dollar-weighted
    sample of requisitions.

    With regard to duplicating, PRMIS provided a count of requisitions
    and prices for electrostatic and offset duplicating work in all DPS
    areas.  However, only the National Capital and Western areas retained
    the individual hard-copy requisitions needed to support our
    validation.  Thus, our validation of the PRMIS' duplicating workload
    focused on DPS' National Capital and Western areas.  Within these
    areas, duplicating requisitions were grouped according to DPS' two
    major production processes and stratified by requisition price
    (greater than $500 or $500 and less).  Statistics for each cell were
    derived, and a hard copy of the original customer request was
    obtained for a dollar-weighted sample of requisitions.

    We concluded that the data were sufficiently complete and accurate
    and thus could serve as a reliable description of DPS' fiscal year
    1993 workload.  Hard-copy requisitions for 385 of the 415 sampled
    PRMIS printing records were obtained and found to validate the PRMIS'
    data on price, production sequence, and requisition number.  We
    obtained hard-copy requisitions for 273 of the 300 sampled
    duplicating records and validated the PRMIS' data on price,
    production sequence, and requisition number.

       STRUCTURING THE FISCAL YEAR
       1994 PRICE COMPARISONS
    -------------------------------------------------------- Appendix II:2

    Our analysis assumes that DPS' fiscal year 1993 workload is
    characteristic of DOD's annual demand for printing and duplicating
    services.  This is not to say that DPS will complete the same volume
    of work each year, but rather that its mix of work will remain
    relatively constant.

    We took a statistically representative sample of DPS' mix of work
    from the fiscal year 1994 incoming work requests.  DPS priced the
    requisitions according to its rate schedule and then sent them to GPO
    for production.  GPO provided an initial price estimate upon
    acceptance of the work and a final invoice price (the contractor's
    price plus a surcharge for GPO's administration of the contract)
    following completion of the work.

          PROTECTION AGAINST SELECTION
          BIAS
    ------------------------------------------------------ Appendix II:2.1

    To match fiscal year 1994 jobs with the fiscal year 1993 work mix, we
    sought to ensure requisite statistical conditions (necessary for the
    preservation of fiscal year 1993 strata properties) and reduce or
    eliminate any perception of selection bias on the part of DPS or GPO.

    The criteria for a matched requisition were specified by the
    statistical cell from which a fiscal year 1993 requisition was drawn.
    Attributes obtained from the fiscal year 1993 requisition (e.g.,
    number of copies, original impressions, available workdays to perform
    the work, paper weight and finished size, type of binding, and
    distribution) served as subordinate guidelines to protect against
    selection bias.  We listed these attributes on the data collection
    instrument (DCI) that DPS plant officials used to nominate a
    requisition for inclusion in our study.  An example of the DCI used
    for a printing requisition is shown in figure II.1.

       Figure II.1:  Sample Form
       Listing Attributes of a
       Printing Requisition

       (See figure in printed
       edition.)

    After DPS plant officials identified a requisition that met the
    parameters of our DCI, they submitted the requisition to GPO for
    production and then provided us with documentation to support their
    nomination (a completed copy of the DCI, the customer's requisition,
    and DPS' schedules used for pricing the product).  Before including
    the nominations in our sample, we tasked a panel comprising our
    personnel with printing, evaluation, and methodological expertise to
    examine them.  The panel ensured that the nominations fit the
    necessary statistical parameters and that, from the viewpoint of the
    printing community, the selection would not put GPO at a
    disadvantage.  All acceptable matches were subsequently reviewed by
    external consultants with printing expertise.  Specifically, we used
    two private sector consultants--Willard Brown, Printing Consultant,
    and Herbert Langford, Langford and Associates.  They validated the
    panel's decisions and reviewed DPS' price estimates, thereby
    providing an additional safeguard against systemic bias on the part
    of DPS areas or plants.

    About 9 percent of DPS-proposed matches failed the review process.
    In these cases, the work was not included in our sample and DPS plant
    officials were requested to nominate replacements that more
    accurately reflected the statistical criteria and attributes
    specified within our DCI.

          THE FISCAL YEAR 1994
          SAMPLING FRAME
    ------------------------------------------------------ Appendix II:2.2

    Table II.3 presents an overview of the study's sampling frame.  The
    table is organized by major production process and lists the sample
    size, responses, and the number of individual products produced using
    each process.

                              Table II.3

                  Sample Overview (Fiscal Year 1994)

                                                          Number
              Major production                Response        of
              process                 Sample         s  products
    --------  --------------------  --------  --------  --------
    Printing
    ------------------------------------------------------------
    1         10x15/11x17 press          115        96        98
    2         Offset press 14x19          90        74        77
               width
    3         Offset press 22x29/         61        44        53
               22x34
    4         Offset press 35x45          39        30        30
    5         Two-color press             33        25        35
               35x45
    6         Roll-fed 22x34              24        17        17
    7         Thermo/envelope/            23        17        17
               letterpress

    Duplicating
    ------------------------------------------------------------
    8         Electrostatic              661       571       946
               duplicating
    9         Offset duplicating         147       114       247
               10x15/11x17
    ============================================================
    Total                              1,193       988     1,520
    ------------------------------------------------------------

             PRINTING SAMPLE
    ---------------------------------------------------- Appendix II:2.2.1

    We asked DPS to match 385 of our validated fiscal year 1993 printing
    requisitions (stratified by major product line, subproduct, and
    requisition price) with incoming fiscal year 1994 requisitions.  DPS
    successfully matched 316 of the 385 requisitions, but at the
    conclusion of our study, GPO's contractors had provided final
    invoices for only 303 requisitions.  Thus, we used a 79-percent
    response rate in estimating differences between the DPS' printing
    price and GPO's final invoice.

             DUPLICATING SAMPLE
    ---------------------------------------------------- Appendix II:2.2.2

    An overview of our sampling scheme for duplicating requisitions is
    shown in table II.4.

                              Table II.4

               Sampled Duplicating Requisitions by DPS
                                 Area

                         Sample                Sample
    DPS area               size  Responses       size  Responses
    ----------------  ---------  ---------  ---------  ---------
    Central Area             91         67         16          8
    National Capital         31         25         38         35
     Area
    Northeast Area           91         68         16         12
    Northwest Area           91         86         16         10
    Southeast Area           80         78         14         11
    Southern Area            91         83         16         11
    Southwest Area           91         78         16         13
    Western Area             95         86         15         14
    ============================================================
    Total                   661        571        147        114
    ------------------------------------------------------------
    Because the National Capital Area (NCA) was unique in its
    distribution of duplicating work, we treated it separately from the
    other DPS areas--both in our validation of the PRMIS' workload and in
    the selection of requisitions for our fiscal year 1994 sample.  We
    asked DPS to match 69 of our validated fiscal year 1993 requisitions
    from NCA (31 electrostatic and 38 offset duplicating, as stratified
    by major production process and requisition price) with an incoming
    fiscal year 1994 duplicating requisition from the same plant.

    To protect against selection bias in the remaining DPS areas, we used
    the properties of the Western Area's validated requisitions to create
    templates for our DCIs.  This allowed us to control DPS' nominations.
    We sent a combined total of 739 requisitions to the seven areas
    (excluding NCA).  From our prior work with PRMIS, we knew the
    statistical properties of the mix of work for each of these areas.
    Using the statistical properties of the mix of work from each of the
    areas, we calculated our estimates.

             COMBINED BILLINGS AND
             OPEN REQUISITIONS
    ---------------------------------------------------- Appendix II:2.2.3

    In the process of validating PRMIS, we identified two classes of
    requisitions that deserved special treatment.  The first class,
    combined billings, was made up of a collection of individual products
    that were batched for production on a single requisition.  The second
    class, open requisitions, usually comprised multiple products or
    recurring tasks for the same customer that were billed to the same
    account.  Open requisitions were, in effect, term contracts to
    provide continuing support to one customer over a period of time.

    In our validation of PRMIS, we found 13 combined billings (2 printing
    and 11 duplicating requisitions).  These requisitions consisted of 59
    individual products, each with its own attributes.  For data
    collection purposes, we separated each combined billing into an
    individual DCI for each product.  The responses to these DCIs were
    ultimately combined to reflect the original 13 combined billing
    requisitions.

    In our validation of PRMIS, we found 26 open requisitions (2
    printing, and 24 duplicating requisitions).  These requisitions were
    different in that, as blanket purchase agreements, their attributes
    were more those of a contract than an individual product.  For
    sampling purposes, we asked DPS to match the original fiscal year
    1993 requisition with a fiscal year 1994 open requisition having
    approximately the same dollar value and requiring similar production
    processes and delivery schedules--preferably a fiscal year 1994
    contract supporting the same customer.  As with individual
    requisitions, each of DPS' open requisition nominations were subject
    to the review and approval of our panel.  In our study, DPS
    successfully matched 23 of the 26 open requisitions (1 printing and
    22 duplicating requisitions, collectively representing a total of 310
    products).

    For each requisition that was approved by the panel, we identified a
    start date and tasked DPS to provide for our sample a prescribed
    sequence of products submitted against that contract.  As products
    were submitted against these requisitions, DPS forwarded the work to
    GPO for production and provided us with the customer's requisition
    and DPS' schedules used for pricing the product.

    Though open requisitions are analogous to GPO's direct-deal term
    contracts, DPS does not provide a price reduction on these
    requisitions.  GPO states that if the work were done by GPO, however,
    the DOD customer would receive a price discount.  For this reason, we
    asked two agencies to price all of the open requisition products as
    though the work were performed under their existing GPO direct-deal
    term contracts.  Thus, we obtained three sets of prices for each open
    requisition:  DPS' price, GPO's final invoice price, and the
    agencies' direct-deal contract price.  The direct-deal price was used
    as a surrogate for GPO's price in our basic price comparisons.  GPO's
    final invoice was used to support a separate analysis of term
    contract prices.  Because open requisitions are billed monthly, we
    integrated the prices obtained for each sample in order to reflect
    the monthly charge for each requisition.

             SAMPLE NONRESPONSE
    ---------------------------------------------------- Appendix II:2.2.4

    To maximize response rates, we visited 47 of the 99 DPS plants
    involved in our study to review the progress DPS was making with its
    nominations.  On a continuing basis, we made phone calls to encourage
    high response rates.  Weekly, we informed DPS area officials of the
    number of successful nominations made by their subordinate plants.
    We investigated apparent difficulties or inadequacies in achieving
    our response goals.  Through these efforts, we achieved an 83-percent
    response rate for the combined count of printing and duplicating
    requisitions.  To ensure that the missing requisitions did not change
    the representativeness of our sample, we examined the potential bias
    that might be introduced by nonresponse.  Categories of nonresponse
    are shown in table II.5.

                              Table II.5

                      Categories of Nonresponse

                              Number of
                             requisitio
    Nonresponse reason               ns  Direction of bias
    -----------------------  ----------  -----------------------
    Sensitive or classified          43  Favors GPO: Production
     material                             of classified or
                                          sensitive material
                                          would likely increase
                                          the contractor price.
    Downsizing                       24  No apparent bias.
    GPO rejected production          32  Favors GPO: Most cases
                                          were the result of our
                                          demand for a
                                          requisition with a
                                          rapid turnaround time.
    Miscellaneous                    76  No apparent bias:
                                          Nonresponse was
                                          related to sample size
                                          in each area.
    Missing GPO final                30  No apparent bias: DPS'
     invoice                              last day for data
                                          collection was
                                          September 30, 1994.
                                          The final invoices
                                          were not received by
                                          January 15, 1995.
    ------------------------------------------------------------
    As may be seen, except for the special provisions needed to safeguard
    national security and other sensitive materials, our research did not
    indicate the presence of systemic bias against GPO in our sample.
    Thus, the study's final estimates were calculated by reweighting the
    sample to ignore nonresponse.

       THE ANALYSIS
    -------------------------------------------------------- Appendix II:3

    DPS' fiscal year 1993 mix of work was used to define a statistically
    matched set of fiscal year 1994 requisitions.  The difference between
    DPS' prices and GPO's invoice prices for this set served as the basis
    for the study's price comparisons.  Based on dollar-weighted sampling
    strata, requisition price differences were used to estimate the
    fiscal year 1994 population values.

          POST-STRATIFICATION AND THE
          ANALYSIS OF TERM CONTRACTS
    ------------------------------------------------------ Appendix II:3.1

    GPO officials stated that about 75 percent of GPO contract work for
    government agencies is done through term contracts rather than
    through one-time purchases.  These officials pointed out that these
    contracts usually result in considerably lower prices for the
    agencies.  Our analyses included a post-stratification of the 1994
    DPS products, as distinct from requisitions, to determine the extent
    to which DPS' use of term contracts resulted in savings to the DPS
    customer.  Table II.6 shows the results of these analyses.

                              Table II.6

                     Effect of Term Contract Use

                             GPO price index
                          based on DPS price
    Term contract type                 = 100      Sampling error
    --------------------  ------------------  ------------------
    Printing                              63                  31
    Duplicating                          112                  35
    ------------------------------------------------------------

          GPO'S REPRICING EFFORT
    ------------------------------------------------------ Appendix II:3.2

    At the request of GPO officials, we allowed GPO to use any of its
    term contract information to reprice the DPS work--after GPO had
    completed and billed DPS for our test cases.  GPO officials believed
    that, in most cases, they could have provided DPS with more favorable
    prices if term contracts had been in place and used to price the
    work.  According to GPO, about 75 percent of its commercial work is
    done through term contracts--at prices considerably lower than the
    prices charged for one-time purchases.

    We selectively verified the pricing of a sample of the jobs that were
    repriced by GPO, and we compared those findings with the results of
    our own independent analysis of term contract prices that was
    described earlier.

       QUALITY ASSURANCE EFFORTS
    -------------------------------------------------------- Appendix II:4

    The structured DCIs, our internal review panel, the printing
    consultants, and the site visits of our staff played an important
    role in ensuring the credibility of the data that were finally used
    in our analyses.  These efforts were supported by additional quality
    assurance efforts.  Specifically, we took two samples.  One was a
    statistical subsample of our fiscal year 1994 responses.  The other
    was a sample of instances in which we found extreme percentage
    differences between the DPS and GPO duplicating prices.  Our goal was
    to examine product quality, timing, and pricing issues to detect
    errors and any indication of bias.

          STATISTICAL SUBSAMPLE
          ANALYSIS
    ------------------------------------------------------ Appendix II:4.1

    We took a subsample of 60 of our fiscal year 1994 responses.  We
    compared requisition information from DPS with GPO's product
    information database to determine whether (1) GPO was given the
    DCI-specified time to perform the work and (2) the number of GPO's
    and DPS' product copies were the same.  In all but one case, GPO's
    data agreed with the range specified on our DCI.

    We also used the GPO product information database to determine the
    extent to which DPS requested quality level III work.  (GPO's
    technical specifications range from quality level I for highest
    quality to quality level V for lowest.) GPO told us that by
    specifying quality level III work, DPS forced GPO commercial vendors
    to print the work rather than duplicate it.  GPO states that this
    would put them at a disadvantage in some cases.  We found four jobs
    in our subsample where DPS requested quality level III work--about 7
    percent of our sample.  The majority of the work requested by DPS in
    our subsample consisted of quality levels IV and V.

          EXTREME PERCENTAGE
          DIFFERENCES BETWEEN DPS' AND
          GPO'S DUPLICATING PRICES
    ------------------------------------------------------ Appendix II:4.2

    We looked at 104 requisitions with extreme price differences (in
    percentages).  We used GPO's product information database to verify
    requisition information and obtain both quality levels and pertinent
    dates to determine whether there was any bias against GPO with
    respect to quality levels of work requested and the amount of time
    given GPO to produce the work.  We located 96 of the requisitions in
    the database and investigated each of these cases with telephone
    calls to the DPS plants from which they originated.  Where we
    detected errors, we made appropriate changes.

    (See figure in printed edition.)Appendix III
    COMMENTS FROM THE DEPARTMENT OF
    DEFENSE
    ========================================================== Appendix II

    (See figure in printed edition.)Appendix IV
    COMMENTS FROM THE GOVERNMENT
    PRINTING OFFICE
    ========================================================== Appendix II

     See comment 1.

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 2.

    (See figure in printed edition.)

     See comment 3.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 4.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 5.

    (See figure in printed edition.)

     See comment 6.

    (See figure in printed edition.)

     See comment 7.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 8.

    (See figure in printed edition.)

     See comment 9.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 10.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 11.

    (See figure in printed edition.)

     See comment 12.

    (See figure in printed edition.)

     See comment 13.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 14.

    (See figure in printed edition.)

     See comment 15.

    (See figure in printed edition.)

     See comment 16.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 17.

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 18.

    (See figure in printed edition.)

     See comment 19.

    (See figure in printed edition.)

     See comment 20.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 21.

    (See figure in printed edition.)

     See comment 22.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 23.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 24.

     See comment 25.

    (See figure in printed edition.)

     See comment 26.

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 27.

     See comment 28.

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

     See comment 29.

     See comment 30.

    (See figure in printed edition.)

    The following are GAO's comments on the Government Printing Office's
    (GPO) letter dated February 8, 1995.

    GAO COMMENTS

    1. The points raised in GPO's transmittal letter are addressed in the
    Agency Comments and Our Evaluation section of this report.

    2. In our April 1994 report, we noted that the emergence of various
    electronic technologies has blurred the distinction between printing
    and duplicating.  We also stated that the legal and regulatory
    framework used to manage many aspects of government publishing has
    become outdated.  For the purposes of our study, we chose to
    replicate DPS' fiscal year 1993 mix of work.  Therefore, we selected
    our sample based on DPS' printing and duplicating processes, and have
    annotated table 1 to reflect this.  The definitions for these
    services may differ from those established by the Joint Committee on
    Printing.  See appendix II for additional details on our methodology.

    3. As stated in our April report, we are aware of the limitations in
    DPS' accounting system.  It is for this reason that we were unable to
    perform a meaningful cost comparison.  We chose, with full agreement
    from our congressional requesters, to perform a strictly controlled
    pricing study.  The requesters' staffs were briefed on the reasons
    for and the limitations of this pricing study.

    4. GPO's statement that we did not assess the reliability of DOD
    workload data is not correct.  When we initially received the
    database from DPS, we reorganized it so that we could select our
    fiscal year 1993 sample.  We selected our sample and then asked DPS
    to find the actual fiscal year 1993 requisition that matched our
    selection.  DPS was able to find the identical requisition from its
    printing facilities that matched our request in over 90 percent of
    the cases.  Likewise, the dollar amounts of these requisitions
    substantially agreed with calculations we initially developed.  The
    fact that we found requisition and dollar amounts that were accurate
    assured us that DPS' fiscal year 1993 database was reliable and
    accurate enough that we could base our work on it.

    5. We agree with GPO's comments in this section and have made
    appropriate clarifications in the report.

    6. This concern is addressed in the body of the report.

    7. The data we requested from DPS did not include self-service
    duplicating.  The only work included in our sample was work sent to
    DPS printing facilities on a requisition.  We disagree with GPO that
    we should exclude all DPS requisitions with prices under $25 because
    we believe this would not reflect DPS' actual work mix.

    8. Appropriate changes have been made in the report text.

    9. GPO's statement that our classification of DPS' workload was
    simplistic is incorrect.  We chose to report our results in only four
    categories out of concern for the clarity of the report.  Our
    analysis of the DPS database, however, entailed the examination of 37
    printing and 32 duplicating strata, as described in our methodology.

    10. As reported in our April 1994 report, the distinction between
    printing and duplicating has become blurred.  We discussed quality
    level issues with our in-house printing staff, printing consultants,
    and with DPS and GPO officials.  They told us that the differences
    between quality levels were not always readily distinguishable
    without the benefit of specialized inspection.  Newer technology
    enables non-printing processes to produce print-quality work.  Our
    post-analysis review showed about 7 percent of DPS requisitions
    listed as duplicating, which GPO believed required contractors to
    produce at quality level III ("good" quality as defined by GPO's
    Quality Assurance Through Attributes Program).  We reviewed instances
    where GPO was concerned with quality level III selections and found
    no evidence of systemic bias attempts by DPS.  Furthermore, in
    several instances, DPS plant personnel told us that their equipment
    could produce the quality necessary to satisfy the customer.

    11. We disagree with GPO's statement that we allowed DPS to choose
    our sample, and we discuss this in the Agency Comments and Our
    Evaluation section of this report.

    12. We disagree with GPO's statement that we allowed DPS to control
    the timing and means of delivering sample jobs to GPO.  Again, we
    discuss this in the Agency Comments and Our Evaluation section of
    this report.  We partially agree with GPO that DPS provided the
    source documentation for our analysis.  GPO was also the source of
    some documentation.  Where we thought there was a risk for bias, we
    attempted to verify both DPS and GPO source documentation.

    13. We understand GPO's concerns about paper price increases;
    however, this is a situation that affected both GPO contractors and
    DPS during the course of our study.  We have no evidence to either
    disagree or agree with GPO's concern that commercial vendor prices
    are more sensitive to paper price changes than are DPS' prices.  Much
    like GPO contractors, DPS paper prices are not set on a nationwide
    basis, but are established individually by each DPS printing
    facility.  DPS printing facilities charge according to a rolling
    average price, which is maintained for each type of paper in their
    inventory.  The price level changes as paper purchases are added and
    as paper inventories are used.

    14. We did not test our methodology prior to implementing the survey.
    We did take several steps, however, to assure ourselves that we could
    gather the information we needed.  First, we prepared a methodology
    plan that was discussed extensively with GPO and DPS, and reviewed by
    our methodologists, printing professionals, and external consultants.
    Second, we designed our DCI based on the same characteristics as the
    DCI used in our last printing survey.  We pretested the DCI with DPS
    plant officials and provided GPO with examples of our DCI.  After
    these reviews, we made necessary changes to the forms and procedures
    that we believed were warranted on the basis of the information and
    comments we received.

    15. We used the distribution of duplicating work processes within
    DPS' Western Area fiscal year 1993 workload to select a sample of
    duplicating requisitions from each of DPS' areas, except for the NCA.
    We obtained requisitions from DPS' Western Area fiscal year 1993
    workload to determine how many products were included in the sample
    and summarized these products on our DCIs.  These were sent to seven
    DPS areas, where plant officials nominated requisitions from incoming
    requests and priced and forwarded them to GPO for production
    following normal plant procedures.  Thus, while the sampling criteria
    were derived from Western Area's workload, the actual fiscal year
    1994 requisitions came from seven DPS areas and were produced by GPO
    contractors serving those areas.  We also used the distribution of
    duplicating work processes within DPS' NCA fiscal year 1993 workload
    to select a sample of duplicating requisitions from that area.

    16. When we sampled the duplicating requisitions, we obtained 26 open
    requisitions.  These open requisitions represented an ongoing
    relationship between a DOD customer and a DPS plant; they were
    customer specific rather than product specific.  In replicating these
    requisitions, the mix of products requested by the customer was more
    important than the type of products.  Thus, we needed DPS to nominate
    products from the same or a similar customer based upon the mix and
    volume of the customer's work.  Because this process was customer
    driven, the open requisitions could not be assigned to areas other
    than those from which they were selected.  We recognize that open
    requisitions exist in other DPS areas.  Under our assumption that
    work in the Western Area was similar to work in the other areas, we
    simulated the Western Area open requisitions in six other areas.
    These open requisitions were the only requisitions that were, as GPO
    states, "cloned."

    17. We disagree, as explained in the Agency Comments and Our
    Evaluation section of this report.

    18. We disagree.  In our post-analysis review of a subsample of items
    in our database, information obtained from GPO's database did not
    reveal any situations where GPO was allotted significantly less time
    than required by our product parameters.  Our "outlier" review
    yielded similar results.  In addition, it should be noted that our
    comments cited by GPO in its review of our database were for the use
    of the internal panel and were not a final determination by the panel
    as to whether an actual problem existed.  For example, GPO cites
    sample NEA14-31-186 as having the comment "GPO received less than a
    'fair share' time allotment." This meant that the number of days GPO
    was allowed to perform the work (in this case, 10 days) was lower
    than the number of days suggested on the fiscal year 1994 Job Request
    form (again in this case, over 10).  For this particular requisition
    cited, GPO was allotted 10 days to produce 200 copies of a 1-page
    document.  We did not provide comments for the panel's use if the
    number of days allowed for GPO to perform the work was greater than
    the number suggested because we did not view this as a situation
    where DPS was attempting to bias a selection.

    19. See comment 10.

    20. See comment 7.

    21. DPS plant officials price their work using a standardized pricing
    schedule.  The schedule contains a detailed listing of the various
    production processes--including items such as sundry labor and hand
    assembly.  Contrary to GPO's statement, we noticed that charges for
    these processes were included in DPS sample prices.  Regarding rush
    charges, DPS financial records show that less than 0.5 percent of its
    in-house costs are for rush work.  Any omission of these charges in
    the price estimates would therefore have had a negligible effect on
    our results.  Because the DPS' prices were derived using the normal
    DPS pricing schedule, the prices would have been the actual prices
    charged by DPS if it had produced the work.

    We did not provide GPO access to DPS' prices until receipt of final
    GPO invoice prices.  This was done to prevent any potential GPO bias
    in manipulating final prices.  However, once the final GPO invoice
    price was received, we provided GPO with all data upon request.

    22. GPO's statement that we did not look at unreasonable price
    differences until GPO reported them is not correct.  When we
    completed our data gathering, we began a post-analysis review to look
    at "outliers"--requisitions that exhibited a large percentage
    difference between DPS' and GPO's prices on both ends of the
    spectrum--and some errors were found on both DPS' and GPO's prices.
    Corrections were made to the data when appropriate.

    23. See comment 21.  In addition, GPO was provided all sample
    requisitions for which we had obtained final GPO invoice prices.
    Those sample jobs not provided to GPO did not have final GPO invoice
    prices and therefore were not included in our final analysis.

    24. As stated above, we did deny GPO access to DPS' prices until
    receipt of final GPO invoice prices.  This was done to prevent any
    potential GPO bias in manipulating the final price.  However, once
    the final GPO invoice price was received, we provided GPO with all
    data upon request.  Moreover, GPO received timely access to all of
    our workpapers as requested.  For example, out of eleven items GPO
    requested at the initial meeting following the release of our draft
    report, we satisfied eight of them either that same day or the next,
    including our entire database.  All remaining items were provided
    within a week.

    25. We disagree.  See our Agency Comments and Our Evaluation section.

    26. This is addressed in the body of our report.

    27. This is addressed in the body of our report.

    28. Our effort to collect fiscal year 1994 sample requisitions from
    DPS ceased on September 30, 1994.  However, because of a time lag in
    receiving final GPO invoice prices from contractors, our analysis
    could not be completed.  The report was drafted and sent to GPO and
    DPS for comment only after we had received enough responses and
    corresponding final GPO invoice prices to satisfy our standards.

    29. Appropriate changes have been made in the report.

    30. This issue is addressed in the body of the report.

    MAJOR CONTRIBUTORS TO THIS REPORT
    =========================================================== Appendix V

    NATIONAL SECURITY AND
    INTERNATIONAL AFFAIRS DIVISION,
    WASHINGTON, D.C.

    David R.  Warren, Associate Director
    John Klotz, Assistant Director
    Waverly Sykes, Technical Director
    James Reifsnyder, Evaluator-in-Charge
    David Combs, Senior Evaluator
    Dennis Fauber, Senior Evaluator
    Nancy Lively, Senior Evaluator
    Richard Meeks, Senior Evaluator
    Yolanda Elserwy, Evaluator
    Roberta Gaston, Evaluator
    David Keefer, Evaluator
    Paul Newton, Evaluator
    Arthur James, Mathematical Statistician
    Mae Jones, Communications Analyst