Acquisition Reform: Obstacles to Implementing the Federal Acquisition
Computer Network (Letter Report, 01/03/97, GAO/NSIAD-97-26).

GAO reviewed the federal government's progress in developing and
implementing the Federal Acquisition Computer Network (FACNET), focusing
on: (1) federal agencies' use of FACNET; (2) problems and benefits of
using FACNET; (3) concerns relating to the Federal Acquisition
Streamlining Act's (FASA) requirements for FACNET; and (4) management
obstacles to effective governmentwide implementation of FACNET.

GAO found that: (1) overall, the federal government has executed
relatively few procurement actions through FACNET; (2) the Department of
Defense executed the vast majority of all FACNET procurement actions
that federal agencies have reported; (3) difficulties doing business
through FACNET have overshadowed the benefits of using it; (4) officials
from at least 14 of the 18 agencies GAO contacted rated the lack of a
sound FACNET infrastructure, effective engineering and operational
management, and a well-populated and fully functional centralized
contractor registration database as great or very great obstacles to
effective FACNET implementation; (5) officials of many federal agencies
said the current FACNET approach is out of step with new, cost-effective
technologies and buying practices; (6) although FACNET has, in some
instances, resulted in lower prices and expanded access to vendors,
agency officials and vendors often said that FACNET is not producing the
benefits expected; (7) agencies' analyses have concluded that using
FACNET to award contracts of $25,000 or less often takes longer and
requires more resources than traditional simplified purchasing methods
for such awards; (8) as mandated by FASA, FACNET implementation has
focused primarily on competitive contract awards, requiring agencies to
exchange information with multiple, often unknown vendors; (9)
organizations with the most success in using electronic data interchange
technology for purchasing, however, typically use it to transmit
high-volume, routine, and repetitive transactions with a small group of
known suppliers; (10) federal officials have stated that FASA's
requirement to focus FACNET's implementation principally on competitive
contract awards may not have been a good approach and has contributed
significantly to FACNET's problems; (11) agencies and vendors have
consistently cited leadership and management shortcomings as major
reasons for delays and unresolved problems in FACNET implementation; and
(12) agency officials also expressed considerable uncertainty about what
the governmentwide strategy for FACNET implementation is.

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

 REPORTNUM:  NSIAD-97-26
     TITLE:  Acquisition Reform: Obstacles to Implementing the Federal 
             Acquisition Computer Network
      DATE:  01/03/97
   SUBJECT:  Federal procurement
             Federal procurement policies
             Computer networks
             Information resources management
             Small purchases
             Competitive procurement
             Procurement regulation
             Cost effectiveness analysis
IDENTIFIER:  Federal Acquisition Computer Network
             FACNET
             GSA Federal Procurement Data System
             DOD Electronic Data Interchange Program
             Internet
             Value Added Network
             GSA Central Contractor Registration Data Base
             
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Cover
================================================================ COVER


Report to Congressional Committees

January 1997

ACQUISITION REFORM - OBSTACLES TO
IMPLEMENTING THE FEDERAL
ACQUISITION COMPUTER NETWORK

GAO/NSIAD-97-26

Acquisition Reform

(705121)


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

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

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


B-272646

January 3, 1997

Congressional Committees

The Federal Acquisition Streamlining Act of 1994 (FASA), Public Law
103-355, mandated the establishment of a Federal Acquisition Computer
Network (FACNET) architecture to enable federal agencies and vendors
to do business electronically in a standard way.  FACNET is intended
primarily for purchases valued above the micro-purchase threshold
($2,500) up to the simplified acquisition threshold (currently
$100,000).\1

Federal officials and others expected many benefits from FACNET,
including expanded contracting opportunities for small businesses,
increased competition and lower prices for goods and services,
reduced contract processing times, simplified procurement processes,
and improved federal productivity. 

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


--------------------
\1 Both thresholds were established by FASA. 


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

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

Title IX of FASA, enacted on October 13, 1994, provided the statutory
framework for the governmentwide EC/EDI initiative.\2

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

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

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


--------------------
\2 Essentially, the FACNET program merged with the ongoing
governmentwide initiative. 


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

Overall, the federal government has executed relatively few
procurement actions through FACNET.\3 Available data indicates that
in 1995 less than 2 percent of about 2 million federal procurement
actions valued at $2,501 to $100,000--FACNET's target dollar
range--were accomplished through FACNET.  DOD executed the vast
majority of all FACNET procurement actions that federal agencies have
reported. 

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

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

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

In addition to this fundamental problem, agencies and vendors have
consistently cited leadership and management shortcomings as major
reasons for delays and unresolved problems in FACNET implementation. 
The Administrator for Federal Procurement Policy, and other OFPP and
ECA-PMO officials have (1) acknowledged shortcomings in management of
the governmentwide FACNET program and (2) said that ad hoc funding
and staffing of the ECA-PMO has hampered effective program management
effort.  Agency officials also expressed considerable uncertainty
about what the governmentwide strategy for FACNET implementation is. 
Currently, the federal government lacks a coherent strategy and
implementation approach for efficiently and effectively carrying out
the agencies' requirements for the acquisition function using various
EC technologies and purchasing methods, where appropriate. 


--------------------
\3 Throughout this report, the term "procurement actions" includes
purchase orders and other new contract awards as well as task orders
(for services) and delivery orders (for products) under existing
contracts, as reported into the Federal Procurement Data System. 


   LIMITED USE OF FACNET
------------------------------------------------------------ Letter :3

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

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

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

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

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

   Figure 1:  Agency Views on
   Relative Importance of Various
   Electronic Procurement Methods

   (See figure in printed
   edition.)

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

   (See figure in printed
   edition.)


--------------------
\4 About 1 year earlier, the President's memorandum set several
milestones for the governmentwide EC initiative, which included
implementing a full-scale EC/EDI system by July 1995 and
completing--to the maximum extent possible--its governmentwide
implementation for appropriate federal purchases by January 1997. 
FASA provides various exceptions from the use of FACNET in cases
where individuals in specified federal positions determine that such
use is not practicable or cost-effective. 

\5 FASA also requires that governmentwide, before January 2000, at
least 75 percent of FACNET-eligible contracts in this same dollar
range be awarded through FACNET during a preceding fiscal year. 

\6 In addition, data on the total number of contract awards within
the $2,501 to $100,000 dollar range is not collected governmentwide. 
DOD, however, does collect such information. 

\7 We based these statements on the best information available.  This
included a DOD-funded study by the Logistics Management Institute,
which estimated that 12 percent of DOD's fiscal year 1994 procurement
actions were for $2,501 to $100,000 and 85 percent were for $2,500 or
less.  Assuming these estimates are reasonably accurate for
governmentwide use, we applied them to the 18 million procurement
actions federal agencies reported to the Federal Procurement Data
System for calendar year 1995. 


   PROBLEMS USING FACNET
------------------------------------------------------------ Letter :4

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


      BACKGROUND ON FACNET
---------------------------------------------------------- Letter :4.1

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

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


--------------------
\8 Participating VANs must be tested and certified by DOD. 

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


      OPERATIONAL PROBLEMS
      REPORTED THROUGHOUT FACNET
      INFRASTRUCTURE
---------------------------------------------------------- Letter :4.2

There was a broad consensus that FACNET has had operational problems. 
For example, government and industry FACNET users reported hundreds
of malfunctions in sending and receiving FACNET transactions.  Lost,
late, and duplicate transactions and network interruptions frustrated
agencies, VANs, and vendors and delayed procurements.  ECA-PMO
officials and users stated that these problems were significant. 

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

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

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

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

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


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

\11 S.D.M.  Supply, Inc., B-271492, June 26, 1996, 96-1 CPD para. 
288, aff"d., Department of the Army--Recon., B-271492.2, Nov.  27,
1996, 96-2 CPD para. 

\12 Defense Information Systems Agency Management of Trouble Tickets
For Electronic Commerce/Electronic Data Interchange (DOD Inspector
General Report No.  97-010, Oct.  28, 1996). 

\13 Vendor Participation in the Federal Acquisition Computer Network
(DOD Inspector General Report No.  97-002, Oct.  4, 1996). 


      CCR DATABASE IS NOT
      OPERATING AS INTENDED
---------------------------------------------------------- Letter :4.3

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

DOD reported in October 1996 that only about 4,000 of an estimated
300,000 government contractors had validated registrations in the
database.  Currently, agencies must award contracts to unregistered
vendors because the CCR database does not have enough registered
vendors to supply the full range of products and services needed. 
Sixteen of the 17 agencies from which we obtained information on this
matter cited the lack of a well-populated and fully operational CCR
database as a great or very great obstacle to efficient and effective
implementation of FACNET.  (See
table III.2, in app.  III, for details.)


      AGENCIES ARE OPTING FOR
      OTHER EC METHODS
---------------------------------------------------------- Letter :4.4

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

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

The DOD Inspector General reported that DOD officials responsible for
FACNET had (1) acknowledged that the evolution of new technologies
was creating alternatives to DOD's original concept of FACNET as the
single mechanism for EC/EDI procurements and (2) indicated that
alternatives were being analyzed that would still maintain the single
face to industry goal.\16 In a July 1996 memorandum, the Assistant
Secretary of the Air Force stated that while the DOD procurement
community has recognized that the current network for FACNET needs
changing, there is no current solution.  In November 1996, DOD
expressed the belief that in conducting competitive procurements, the
requirements to be FACNET-compliant, particularly the single face to
industry goal, are critical.  For other than competitive transactions
(which includes noncompetitive awards and orders under existing
contracts), DOD added, it may not be necessary to meet FACNET
requirements. 

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


--------------------
\14 In 1995, purchase cards were used at most federal agencies for
over 4 million purchases--worth more than $1.6 billion--and in 1996
purchase card sales were $2.9 billion.  Most of the 1995 purchases,
however, were valued at less than the FACNET target dollar range, and
this emphasis is expected to continue.  See our report, Acquisition
Reform:  Purchase Card Use Cuts Procurement Costs, Improves
Efficiency (GAO/NSIAD-96-138, Aug.  6, 1996). 

\15 The Interagency Acquisition Internet Council was established May
22, 1996, to seek and promote ways to optimize use of the Internet in
streamlining the federal acquisition process and increasing
communications of federal acquisition-related information. 

\16 DOD Implementation of Electronic Commerce in Contracting for
Small Purchases (DOD Inspector General Report No.  96-129, May 24,
1996). 


      VENDORS FIND FEW INCENTIVES
      FOR PARTICIPATION
---------------------------------------------------------- Letter :4.5

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

  -- some buyers accept fax queries for more information and send
     faxes to clarify FACNET solicitations, while other procuring
     activities no longer permit use of faxes and will ignore any
     incoming fax messages;\17

  -- there seems to be no consistent policy covering procurements
     exempted from use of FACNET;\18 and

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

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

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

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

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

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


--------------------
\17 The proposed FAR Part 13 restructuring rule (published in the
Federal Register on Sept.  13, 1996) stated that if an acquisition
was conducted through FACNET, agencies need not respond to telephone
or fax inquiries from vendors unless they are unable to receive
inquiries through FACNET. 

\18 DOD's policy memorandum, dated June 23, 1995, to its
FACNET-capable activities required that all simplified procurements
be issued via FACNET, unless exempted. 

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

\20 Implementation of the Federal Acquisition Streamlining Act of
1994 (GAO/T-NSIAD/AIMD-95-190, July 20, 1995). 


      EXPECTED BENEFITS NOT YET
      BEING REALIZED
---------------------------------------------------------- Letter :4.6

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

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

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

The Administrator for Federal Procurement Policy told us that the
problems reported by frontline procurement staff trying to implement
FACNET prompted his office to recommend several policy changes last
year.  The FAR Council adopted many of these recommended changes, as
part of the proposed FAR Part 13 restructuring rule.\21 The proposed
rule would give agencies greater flexibility in using FACNET, as OFPP
recommended, including the authority to describe requirements using
multiple brand names for purchases under $25,000 and conduct more
expedited evaluation of vendors' quotes or offers.  Additionally, the
proposed rule states that agencies need not respond to inquiries (1)
by telephone or fax, unless they are unable to receive inquiries
through FACNET or (2) through any medium (including FACNET) if doing
so would interfere with their ability to conduct the procurement in
an efficient manner.  The Administrator said these changes were
intended to address procurement offices' complaints that FACNET had
increased both the resources needed to evaluate quotes and
procurement leadtimes, compared with traditional solicitation
methods.  He said the changes were also intended to enhance FACNET's
viability and increase agencies' use of it. 

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

   Figure 2:  Reported Benefits of
   FACNET Realized by Federal
   Agencies

   (See figure in printed
   edition.)

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

   (See figure in printed
   edition.)


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


   CONCERNS ABOUT FASA'S
   REQUIREMENTS FOR FACNET
------------------------------------------------------------ Letter :5

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

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

Three federal agencies that are using EDI successfully for one-to-one
transactions--the Defense Logistics Agency, GSA, and the Department
of Veterans Affairs--reported transmitting a total of about 840,000
delivery orders and 517,000 invoices in 1995.\24 The Administrator
for Federal Procurement Policy stated that a lot of progress has been
made in federal agency use of EDI technology for acquisition--but
outside of FACNET--as shown by these three agencies' efforts on
one-to-one transactions.  According to DOD, (1) the organizations
currently processing these one-to-one transactions are primarily
utilizing proprietary solutions, or noncompliant standards, and do
not present a single face to industry at this time and (2)
maintaining and sustaining such actions are outside DOD's Information
Infrastructure--"a FACNET compliant system."

Because the technical and business requirements for such one-to-many
transactions differ significantly from one-to-one transactions,
agencies using FACNET have not been able to benefit fully from the
lessons learned and from long-term familiarity with electronic
delivery orders and invoices on the part of commercial companies and
the Defense Logistics Agency, GSA, and the Department of Veteran
Affairs.  Moreover, the use of FACNET for one-to-many transactions is
essentially a government-unique business application of EDI,
involving different business and technical considerations than
one-to-one delivery orders and invoices.  Several OFPP, ECA-PMO, GSA,
and other agency officials said that focusing FACNET's implementation
on competitive procurements has contributed significantly to FACNET's
problems and the skepticism that surrounds the existing
infrastructure.  The Administrator for Federal Procurement Policy and
other agency officials also told us that FASA's requirement to focus
FACNET principally on awarding relatively low dollar value contracts
competitively may not have been a good idea. 


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

\23 In a one-to-one transaction, information is exchanged between
only one company (or organization) and another. 

\24 The three agencies reported transmitting through their own EDI
(non-FACNET) systems the following numbers of delivery orders and
invoices, respectively, in 1995:  the Defense Logistics Agency
(325,586 and 93,735), GSA (157,351 and 37,999), and the Department of
Veterans Affairs (357,443 and 385,016). 


   LEADERSHIP AND MANAGEMENT
   PROBLEMS
------------------------------------------------------------ Letter :6

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

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

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

In addition, OFPP and the ECA-PMO have not systematically integrated
and managed the total framework of projects and functions necessary
to develop, implement, and use FACNET and other EC technologies in a
manner that reflects the single face goal.  As a consequence, the
development and use of key components of FACNET, including the
architecture, the CCR database, operational procedures, business
information to attract vendors, and policy guidance on the use of
FACNET for agencies and the private sector have not been clearly
linked.  Another consequence is that governmentwide priorities for
FACNET have not been clearly established, communicated, and linked. 

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

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

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

The Administrator has acknowledged that there have been shortcomings
in management of the governmentwide FACNET program.  Officials in
OFPP and the ECA-PMO told us they were aware of the agencies'
concerns about the leadership and overall management of FACNET
implementation.  They acknowledge that the kind of program management
and reporting described above has not been developed and is needed. 
However, they observed that ad hoc funding and staffing of the
ECA-PMO from executive agencies has hampered effective program
management efforts. 

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

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

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

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

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


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


   CONCLUSION
------------------------------------------------------------ Letter :7

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

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


   RECOMMENDATIONS
------------------------------------------------------------ Letter :8

We recommend that the Director, Office of Management and Budget,
ensure that the Administrator for Federal Procurement Policy, in
consultation with the Secretary of Defense, the Administrator for
General Services, the NASA Administrator, and the heads of other
major federal procuring agencies, develops a coherent and integrated
federal strategy--and implementation approach--for using, where
appropriate, various EC technologies and purchasing methods,
including FACNET, for effectively and efficiently carrying out the
agencies' requirements for the acquisition function.  The strategy
and approach should incorporate consideration of the need to achieve
the single-face-to-industry goal. 

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


   AGENCY COMMENTS
------------------------------------------------------------ Letter :9

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

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

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

OFPP stated that our report was very helpful in focusing its
governmentwide EC efforts.  To help focus on solutions, OFPP stated
that a committee of the President's Management Council has been
established to assist agency heads to manage the transition from
paper to electronics, focus resources, increase management
efficiency, accelerate implementation, and connect resources to
results.  OFPP said it is continuing to pursue the development of
FACNET for use, where appropriate, to streamline acquisition
processes.  OFPP said it is also concerned that FACNET and all
procurement policies offer real improvements in serving the user and
meeting the important missions entrusted to government in a
cost-effective way. 

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

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

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

DOD stated that it will continue (1) to execute its FACNET
implementation plan and (2) increase the volume of transactions
through the infrastructure over the next three fiscal years. 
Finally, DOD stated that it is ready to work with the OFPP, GSA, and
NASA Administrators and the heads of other major federal procuring
agencies to assist them in their development of independent
strategies and the overall federal EC strategy for federal
procurement. 

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


   SCOPE AND METHODOLOGY
----------------------------------------------------------- Letter :10

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

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

To address the problems and benefits of FACNET, FASA's requirements
for FACNET, and obstacles to its implementation, we assessed FACNET
guidance, implementation plans, and agencies' reports indicating the
status of FACNET implementation.  We also compared the government's
overall FACNET strategy and implementation approach with (1) the
EC/EDI implementation strategies and practices of other public and
private organizations and (2) the goals, objectives, and milestones
established for FACNET by FASA and established for the governmentwide
EC program by the October 26, 1993, presidential memorandum on
streamlining procurement through EC.  We reviewed FACNET guidance,
implementation plans, schedules, transaction data, and status reports
prepared by OFPP, the ECA-PMO, the DOD EC Office, and the Defense
Information Systems Agency.  To further assess progress and
obstacles, we interviewed VAN representatives; FACNET vendors; and
senior OFPP, DOD, and GSA officials responsible for the
governmentwide FACNET program or key components, such as the
architecture, the CCR database, and FACNET policy and procedures. 

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


--------------------------------------------------------- Letter :10.1

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

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

Louis J.  Rodrigues
Director, Defense Acquisition Issues


List of Congressional Committees

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

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

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

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

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

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


RESPONDENTS TO OUR DATA COLLECTION
INSTRUMENT
=========================================================== Appendix I

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

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

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

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


FACNET TRANSACTIONS
========================================================== Appendix II

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



                                    Table II.1
                     
                      FACNET Transactions, January-December
                                       1995

                  Contract                         Procurement
                solicitations                        actions
            ---------------------               ------------------
                                     Responses
                                            to
              Public   Other than  solicitatio  Purchase  Delivery      Value of
Agency          RFQs  public RFQs           ns    orders    orders        orders
----------  --------  -----------  -----------  --------  --------  ------------
Agricultur        92           10           64        49         0      $529,017
 e\a,b
AID\a,c            0            0            0         0        27            \f
Commerce\d       456            0        2,891       184         0     2,558,250
Defense\d     66,116       41,057      478,894   105,217     4,698            \f
Education         66            0          253        21         1        55,686
Energy\d         117          149          762       186        13     1,078,968
EPA               42            0           18         0         0             0
FEMA\a,c           0            0            0         0         0             0
GSA\d              5            0            2         0         0             0
HHS\d            148           10          166        32     1,635   118,722,728
HUD                0            0            0         0         0             0
Interior\e     1,682           87        6,566       577        20     4,479,054
Justice           83            0          139        17         0        45,501
Labor\d            0           10            0         0         0             0
NASA\d            12           17            0         0         0             0
OPM               27            0           11         0         0             0
SBA\a,b            0            0            0         0         0             0
State\a,b         81           10          180        28         0       163,483
Transporta        67            0          102        43         0       347,957
 tion\a,b
Treasury\a       299            0        1,462       242         1     3,240,276
 ,b
VA\d               0            0            0         0         0             0
================================================================================
Total         69,293       41,350      491,510   106,596     6,395  $131,220,920
                                                                              \f
--------------------------------------------------------------------------------
\a Data not verified by agency. 

\b Agency did not respond. 

\c Agency not sent a data collection instrument. 

\d Corrected data provided by agency. 

\e Interior did not have data from the Defense gateway to report for
October-December. 

\f DOD and Agency for International Development did not report the
value of their orders.  Consequently, the total value of orders
reported is underestimated, most likely significantly. 

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



                                    Table II.2
                     
                     FACNET Transactions, January-March 1996

                  Contract                         Procurement
                solicitations                        actions
            ---------------------               ------------------
                                     Responses
                                            to
              Public   Other than  solicitatio  Purchase  Delivery      Value of
Agency          RFQs  public RFQs           ns    orders    orders        orders
----------  --------  -----------  -----------  --------  --------  ------------
Agricultur        17            0            2         0         0            $0
 e\a
AID\a              0            0            0         0         0             0
Commerce          58            0          639        21         0       284,000
Defense\a     22,335       28,987      363,932    17,069         0         ---\c
Education          0            0            0         3         0        23,649
Energy\b          86           20          776        60         2       631,983
EPA               13            0           16         0         0             0
FEMA\a             0            0            0         0         0             0
GSA                0            0            0         0         0             0
HHS\b             73            7          282        12       736    53,396,540
HUD                0            0            0         0         0             0
Interior         645            0        1,883       222         0     1,584,508
Justice           18            0            0         0         0             0
Labor\b            0            6            0         0         0             0
NASA\b             2            0           60         1         0         ---\c
OPM                2            0            0         0         0             0
SBA\a              0            0            0         0         0             0
State\a           31            0          189        10         0        99,554
Transporta        12            0           79        13         1        94,716
 tion\a
Treasury\b        55           84          101        17         0       234,478
VA                 0            0            0         0         0             0
================================================================================
Total         23,347       29,104      367,959    17,428       739  $56,349,428\
                                                                               c
--------------------------------------------------------------------------------
\a Data not verified by agency. 

\b Corrected data provided by agency. 

\c DOD and NASA did not report the value of their orders. 
Consequently, the total value of orders reported is underestimated,
most likely significantly. 

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


AGENCY RESPONSES TO OUR QUESTIONS
ABOUT FACNET
========================================================= Appendix III

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



                                   Table III.1
                     
                        Responses Concerning Future Use of
                      Various EC Tools or Methods, Including
                                      FACNET

Question:
To what
extent do
you expect
these EC
"tools" to
be
important
to your           To                                    To a
agency        little                To a      To a      very
through        or no   To some  moderate     great     great    Do not
1999?         extent    extent    extent    extent    extent      know     Total
----------  --------  --------  --------  --------  --------  --------  ========
A. FACNET          0         4         4         4         3         2      17\a
B. Some            2         3         3         1         4         4      17\a
 Alternati
 ve
 Governmen
 t EC
 Solution
C.                 1         2         3         4         6         1      17\a
 Internet
D. Agency-        10         0         2         2         0         3      17\a
 Unique
 System(s)
 or
 Architect
 ure
E. Your            8         1         2         2         1         3      17\a
 Agency's
 Electroni
 c
 Bulletin
 Board
F.                 1         0         7         4         4         1      17\a
 Electronic
 Catalogs
G. Other           0         0         0         0         2         0       2\b
--------------------------------------------------------------------------------
\a One agency did not reply to this question. 

\b Agency officials not required to respond. 

Source:  Our analysis. 



                                   Table III.2
                     
                     Number of Responses Concerning Obstacles
                             to FACNET Implementation

Question: To what
extent, if at all,
is each an obstacle         To                                    To a
to your agency's        little                To a      To a      very
efforts to implement     or no   To some  moderate     great     great
FACNET?                 extent    extent    extent    extent    extent     Total
--------------------  --------  --------  --------  --------  --------  ========
A. Lack of funding           7         7         0         1         3        18
 needed
B. Lack of other             3         7         3         3         2        18
 resources needed
C. Lack of effective        14         4         0         0         0        18
 leadership within
 your agency
D. Lack of effective         2         2         2         5         7        18
 policy leadership
 outside your agency
E. Lack of effective         1         2         2         7         6        18
 government-wide
 program management
F. Lack of effective         1         2         1         2        12        18
 FACNET engineering
 and operational
 management
G. Lack of a sound           0         0         3         3        12        18
 FACNET
 infrastructure that
 works "end to end"
H. Lack of a CCR             0         0         1         4        12      17\a
 database that is
 well populated and
 operational
I. Lack of a clear           3         1         5         3         6        18
 definition of
 "single face to
 industry"
J. Lack of a well-           3         4         6         1         4        18
 defined federal
 strategy for use of
 FACNET
K. Lack of well-            16         2         0         0         0        18
 defined FACNET
 strategy in your
 agency
L. Lack of                   2         5         3         3         4      17\a
 consistent,
 helpful, or
 practical outreach
 information for
 vendors
M. Lack of                  13         3         1         1         0        18
 integration of
 FACNET into your
 agency's systems
N. Lack of data             10         4         3         1         0        18
 security
O. Use of EDI has            7         4         2         4         0      17\a
 made the FACNET
 development or
 simplified
 acquisition
 processes more
 difficult
P. Fragmented                3         4         5         3         3        18
 standards
 implementation
Q. Obstacles caused          7         4         3         2         2        18
 by the statutory
 requirements for
 FACNET
R. Other management,         0         0         0         1         2       3\b
 operational, legal,
 or policy problems
--------------------------------------------------------------------------------
\a One additional response was marked "unknown."

\b Agency officials not required to respond. 

Source:  Our analysis. 



                                   Table III.3
                     
                     Responses Concerning Benefits of FACNET

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

\b One additional response was marked "unknown."

\c Two additional responses were marked "unknown."

\d Agency officials not required to respond. 

Source:  Our analysis. 




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE NATIONAL
AERONAUTICS AND SPACE
ADMINISTRATION
========================================================= Appendix III




(See figure in printed edition.)Appendix V
COMMENTS FROM THE GENERAL SERVICES
ADMINISTRATION
========================================================= Appendix III



(See figure in printed edition.)




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE OFFICE OF
FEDERAL PROCUREMENT POLICY
========================================================= Appendix III



(See figure in printed edition.)




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

See comment 1. 

Now on page 2.
See comment 1. 



(See figure in printed edition.)

See comment 2. 

Now on page 3.
See comment 1. 

Now on page 4.
See comment 1. 



(See figure in printed edition.)

Now on page 6.
See comment 2. 

Now on page 9.
See comment 2. 

Now on page 11.
See comment 1. 

Now on page 11.
See comment 3. 



(See figure in printed edition.)

See comment 1. 

Now on page 12.
See comment 1. 

Now on page 20.
See comment 1. 



(See figure in printed edition.)


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


   GAO COMMENTS
------------------------------------------------------- Appendix III:1

1.  We made changes to the report to reflect DOD's comments. 

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

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


MAJOR CONTRIBUTORS TO THIS REPORT
======================================================== Appendix VIII

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

Kevin M.  Tansey
Patricia D.  Slocum
Thomas W.  Hopp

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION

Carl M.  Urie
Gwendolyn A.  Dittmer

OFFICE OF GENERAL COUNSEL

John A.  Carter

*** End of document. ***