nsiad-97-26 acquisition reform: obstacles to implementing ... · 3/1/1997 · electronic commerce...

United States General Accounting Office

GAO Report to Congressional Committees

January 1997 ACQUISITIONREFORM

Obstacles toImplementing theFederal AcquisitionComputer Network

GAO/NSIAD-97-26

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

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January 3, 1997

Congressional Committees

The Federal Acquisition Streamlining Act of 1994 (FASA), Public Law103-355, mandated the establishment of a Federal Acquisition ComputerNetwork (FACNET) architecture to enable federal agencies and vendors todo business electronically in a standard way. FACNET is intended primarilyfor purchases valued above the micro-purchase threshold ($2,500) up tothe simplified acquisition threshold (currently $100,000).1 Federal officialsand others expected many benefits from FACNET, including expandedcontracting opportunities for small businesses, increased competition andlower 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 thefederal 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’srequirements for FACNET, and (4) management obstacles to effectivegovernmentwide implementation of FACNET. For this report we obtainedinformation from 18 federal agencies that in fiscal year 1995 accounted forabout 90 percent of both the number and dollar value of federalprocurement actions of $100,000 or less reported to the FederalProcurement Data System (the governmentwide procurement database).The Department of Defense (DOD) alone accounted for approximately80 percent of the number and value of these reported actions. (A list of theresponding agencies is in app. I.)

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

1Both thresholds were established by FASA.

GAO/NSIAD-97-26 Acquisition ReformPage 1

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Title IX of FASA, enacted on October 13, 1994, provided the statutoryframework for the governmentwide EC/EDI initiative.2 FASA mandated thedevelopment and implementation of a governmentwide FACNET

architecture to expand small business access to the governmentmarketplace and simplify and speed the solicitation and award ofcompetitive procurements. FASA requires that FACNET provide(1) widespread public notice of both contracting opportunities andawards; (2) a means for vendors to electronically review, requestinformation 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 ordersunder existing contracts and making payments.

FASA does not specify a particular governmentwide EC/EDI systemsarchitecture or design but does require FACNET to use commercialhardware and software, provide universal user access, and employnationally and internationally recognized data formats. Throughout thisreport, the term “FACNET infrastructure” refers to the communications andcomputer systems that transmit EDI transactions to and from federalagency procuring activities and vendors.

The Administrator for Federal Procurement Policy, who heads the Officeof Federal Procurement Policy (OFPP) in the Office of Management andBudget, has responsibility for overall policy direction and leadership of theFACNET program. The Electronic Commerce Acquisition ProgramManagement Office (ECA-PMO), co-chaired by the General ServicesAdministration (GSA) and DOD and reporting to the Administrator, has beenchartered to coordinate and oversee FACNET implementation throughoutthe federal government. Several agencies have been tasked to lead specificgovernmentwide FACNET projects. In particular, DOD has lead agencyresponsibility for developing, operating, and supporting the FACNET

infrastructure and a new federal centralized contractor registrationdatabase to be used with it.

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

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

3Throughout this report, the term “procurement actions” includes purchase orders and other newcontract awards as well as task orders (for services) and delivery orders (for products) under existingcontracts, as reported into the Federal Procurement Data System.


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

Difficulties doing business through FACNET have overshadowed thebenefits of using it. For example, lost, late, and duplicate transactions andnetwork interruptions have frustrated government and industry users anddelayed procurements. Officials from at least 14 of the 18 agencies wecontacted rated the lack of (1) a sound FACNET infrastructure, (2) effectiveengineering and operational management, and (3) a well-populated andfully functional centralized contractor registration database as great orvery great obstacles to effective FACNET implementation.

Officials of many federal agencies said the current FACNET approach is outof step with new, cost-effective technologies and buying practices, such asthe Internet and electronic ordering from online catalogs. Although FACNET

has, in some instances, resulted in lower prices and expanded access tovendors, agency officials and vendors often said that FACNET is notproducing the benefits expected. Moreover, agencies’ analyses haveconcluded that using FACNET to award contracts of $25,000 or less oftentakes longer and requires more resources than traditional simplifiedpurchasing methods for such awards.

As mandated by FASA, FACNET implementation has focused primarily oncompetitive contract awards, requiring agencies to exchange informationwith multiple, often unknown vendors. Organizations with the mostsuccess in using EDI technology for purchasing, however, typically use it totransmit high-volume, routine, and repetitive transactions, such as deliveryorders under existing contracts and invoices, with a small group of knownsuppliers. Federal officials have stated that FASA’s requirement to focusFACNET’s implementation principally on competitive contract awards—agovernment-unique application of EDI technology—may not have been agood approach and has contributed significantly to FACNET’s problems.

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


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what the governmentwide strategy for FACNET implementation is.Currently, the federal government lacks a coherent strategy andimplementation approach for efficiently and effectively carrying out theagencies’ requirements for the acquisition function using various EC

technologies and purchasing methods, where appropriate.

Limited Use ofFACNET

FASA requires, among other things, the head of each executive agency toprovide for implementation of full FACNET capability “as soon aspracticable” after FASA’s enactment.4 An agency can be certified as fullyFACNET capable when more than 75 percent of its FACNET-eligible contractawards valued at $2,501 to $100,000 were made through FACNET during thepreceding fiscal year.5 However, FASA’s prescribed process for determiningwhat constitutes eligible contracts precludes such a determination untilOctober 12, 1997, at the earliest.6 Therefore, the information needed tomeasure progress toward meeting these FASA criteria for FACNET successwill not be available before that date.

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

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

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

6In addition, data on the total number of contract awards within the $2,501 to $100,000 dollar range isnot collected governmentwide. DOD, however, does collect such information.

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


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According to OFPP, the number of FACNET awards can be expected toremain relatively small unless FACNET proves to be a better, cheaper, fasterpurchasing 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 ofthe 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 coveringJanuary 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 sitesgenerate 80 percent of DOD’s procurement actions of $100,000 or less.

Several agencies reported that their EC implementation plans call for usinga number of different EC technologies. OFPP indicated that (1) each agencywas asked to develop its own implementation plan to integrate EC into itsinternal processes and (2) since EC technologies are evolving, OFPP allowedthe agencies a high degree of discretion in how they applied EC. Accordingto DOD, its approach from the outset has been to utilize any and alltechnologies that were appropriate for a given business transaction. Infigure 1, we show that officials of the agencies we contacted cited mostfrequently the Internet, electronic catalogs, and FACNET, in that order, as EC

tools or methods they expected to have great or very great importance totheir agencies through 1999. (For details on agencies’ responses regardingthis, see table III.1 in app. III.)


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Figure 1: Agency Views on RelativeImportance of Various ElectronicProcurement Methods

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Source: Our analysis of 17 agencies’ responses. One agency, the Department of Commerce, didnot provide its views on this topic.

Problems UsingFACNET

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


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Background on FACNET DOD began developing the current FACNET infrastructure in response to DOD

and governmentwide EC initiatives preceding FASA’s enactment. DOD hasoperated and continued to develop the infrastructure with the statedpurpose of enabling all federal agencies to implement both FACNET

requirements and the goals of the governmentwide EC/EDI program. Thefollowing simplified description illustrates a business transaction movingthrough the current FACNET infrastructure. A buyer at a procuring activityelectronically prepares and transmits Requests for Quotations or othersolicitation data from the activity’s automated procurement systemthrough the infrastructure, which performs several functions. Theseinclude translating the data into standardized EDI formats and relaying theinformation to privately owned, participating Value-Added Networks(VAN).8 VANs distribute the information—in a mutually agreed-uponformat—to vendors that subscribe to their services. Vendors, in turn,transmit their quotations through the network back to the agencies. Afterthe buyer selects the winning vendor, a purchase order is transmitted tothe vendor. Then, a broadcast notice announcing the winning vendor istransmitted to the VANs for distribution to vendors.

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

Operational ProblemsReported ThroughoutFACNET Infrastructure

There was a broad consensus that FACNET has had operational problems.For example, government and industry FACNET users reported hundreds ofmalfunctions in sending and receiving FACNET transactions. Lost, late, andduplicate transactions and network interruptions frustrated agencies,

8Participating VANs must be tested and certified by DOD.

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


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

Most of the 99 contracting offices responding to a recent Army-widesurvey of the effectiveness of FACNET reported problems with the FACNET

infrastructure.10 Feedback from Air Force and Navy operationalcontracting 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 wecontacted cited the lack of a sound FACNET infrastructure and the lack ofeffective engineering and operational management as great or very greatobstacles to efficient and effective implementation of FACNET. (Seetable III.2, in app. III, for details.)

Buyers and vendors have been reluctant to do business through FACNET, inpart, because of operational problems. For example, in April 1996, a seniorcontracting official at the Army’s Training and Doctrine Command statedthat FACNET did not function well enough to support the Command’srequirements in a meaningful way. He noted that outgoing FACNET

solicitations had been lost or received by vendors as late as 2 weeks aftertransmittal and responses vendors had sent out soon enough to be on timewere received at the Command several days after the closing date. Headded that (1) vendors were frustrated about spending time and money tobecome FACNET-capable and then discovering that their quotes did notmake it through the system and (2) vendors often faxed their quotes toTraining and Doctrine Command buyers, in addition to transmitting themthrough FACNET, to ensure receipt. Another Army contracting activityreported that its buyers routinely mail out copies of FACNET award noticesbecause vendors complained that they were not receiving them throughFACNET.

In July 1996, an official with the San Antonio Electronic CommerceResource Center who works with small businesses and government officesin introducing EC into their business practices told us that FACNET has hadits share of growing pains. In particular, he noted that lost and duplicatetransactions and a general instability of FACNET have caused many vendorsto question the wisdom of participating on FACNET.

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

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


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

DOD has recently made major design changes to enhance the FACNET

infrastructure. Officials responsible for the redesign stated that the newinfrastructure should reduce the operational problems that have beenidentified, including an inability to track transactions through FACNET, andlost and late transactions. The DOD Inspector General recently reportedthat the proposed redesign, referred to as the Electronic CommerceProcessing Nodes, should reduce the recurring problems related to lostand late transactions, the inability to track transactions, and the lack ofacknowledgment for transactions.12 In a separate report, the DOD InspectorGeneral recommended that DOD verify that implementation of theElectronic Commerce Processing Nodes corrects technical problemsassociated with FACNET.13

CCR Database Is NotOperating as Intended

Effective implementation of the CCR database is fundamental to the currentFACNET strategy and to achieving a single face to industry. The goal is toprovide (1) contractors with a one-time registration process for doingbusiness with all government procuring activities and (2) governmentbuyers with one central database to query for contractor information.Vendor registration in, and agency use of, the CCR database is mandated inthe governmentwide Federal Acquisition Regulation (FAR) implementingFASA’s requirements for FACNET. The database, however, has beenexperiencing significant problems, is far behind schedule, and is still notperforming its intended role of operating as the single federal contractorregistration system.

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

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

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

13Vendor Participation in the Federal Acquisition Computer Network (DOD Inspector General ReportNo. 97-002, Oct. 4, 1996).


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

Agencies Are Opting forOther EC Methods

According to agency officials, one of the more significant factors limitingthe usefulness of FACNET is that other electronic purchasing methods areavailable that are simpler and faster. For example, purchase cards(government-issued commercial credit cards);14 the Internet; onlinecatalogs, including the GSA’s automated supply schedule contracts; andother commercial alternatives have been introduced into governmentcontracting and their use is growing rapidly. Use of the purchase cards forcontract payment, combined with electronic ordering from onlinecontracts, and/or new, more flexible procedures for the use of federalsupply schedule contracts provides agencies with readily availablealternatives to meeting their procurement needs that were not availablejust a few years ago, when FASA was being written. Moreover, technologydevelopments are expected to continue to offer opportunities to improvefederal purchasing methods.

These developments have led some agencies and many federal officialsinvolved with FACNET implementation to question whether—especially forsmall competitive acquisitions, such as those under $25,000—the use ofthe current FACNET infrastructure makes good business sense. NationalAeronautics and Space Administration (NASA) officials said that NASA

intended to concentrate its EC efforts on Internet-based acquisitionservices and not FACNET. Some Air Force and Army contracting activitieshave also suggested using the Internet instead of FACNET. Officials of 15federal agencies are working together to pursue Internet-based initiatives.15

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

14In 1995, purchase cards were used at most federal agencies for over 4 million purchases—worthmore 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 tocontinue. See our report, Acquisition Reform: Purchase Card Use Cuts Procurement Costs, ImprovesEfficiency (GAO/NSIAD-96-138, Aug. 6, 1996).

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


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creating alternatives to DOD’s original concept of FACNET as the singlemechanism for EC/EDI procurements and (2) indicated that alternativeswere being analyzed that would still maintain the single face to industrygoal.16 In a July 1996 memorandum, the Assistant Secretary of the AirForce stated that while the DOD procurement community has recognizedthat the current network for FACNET needs changing, there is no currentsolution. In November 1996, DOD expressed the belief that in conductingcompetitive procurements, the requirements to be FACNET-compliant,particularly the single face to industry goal, are critical. For other thancompetitive transactions (which includes noncompetitive awards andorders under existing contracts), DOD added, it may not be necessary tomeet FACNET requirements.

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

Vendors Find FewIncentives for Participation

Many small businesses have stated that the lack of clear and consistentFACNET policy, procurement procedures, and specific business informationare major disincentives to FACNET participation for them. For example,some FACNET vendors said that inconsistent and, in some cases, directlyopposite practices were used at different procuring activities. Theypointed out that

• some buyers accept fax queries for more information and send faxes toclarify FACNET solicitations, while other procuring activities no longerpermit use of faxes and will ignore any incoming fax messages;17

• there seems to be no consistent policy covering procurements exemptedfrom use of FACNET;18 and

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

17The 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 totelephone or fax inquiries from vendors unless they are unable to receive inquiries through FACNET.

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


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

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

Some vendors complain that they are unable to get the information theyneed on agencies’ and procuring activities’ current and future FACNET

business opportunities. Vendors point out that they need such informationto determine whether FACNET will generate sufficient revenues to justifythe investments needed to participate in FACNET. Last year we testifiedthat, depending on the volume of transactions and types of services,businesses could incur costs ranging from about $70 to several thousanddollars monthly for VAN services alone. The use of VANs is a key componentof the current FACNET infrastructure.20

Agency officials also stated that FACNET can be expensive for vendors toimplement. According to one agency official, vendors are unwilling tomake the investment in time and money to participate, because of theproblems the government is experiencing with FACNET. More than40 percent of the contracting activities in the Army’s 1996 FACNET surveysaid that there were insufficient numbers of vendors participating inFACNET. EC program managers at other agencies told us that FACNET

solicitations often had to be canceled because of little or no vendorresponse. 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 toparticipate.

The Administrator for Federal Procurement Policy acknowledged that VAN

costs create major problems for small businesses. He added that a smallbusiness has to sell a lot to the government to make the investmentworthwhile, which could have the effect of concentrating work among aclass of EDI-capable vendors that specialize in doing government businessover FACNET.

19In an audit on vendor participation in FACNET, the DOD Office of the Inspector General surveyed100 vendors, of which 85 identified one or more of the following major impediments to using FACNETto conduct small purchase transactions with DOD. The vendors said they were not participatingbecause (1) they were not aware of FACNET, (2) FACNET was not an appropriate procurementmethod for some small- and medium-sized vendors, and/or (3) FACNET was unreliable. (See DODInspector General Report No. 97-002, pages i, 5, and 7.)

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


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DOD acknowledged that there is a cost to small businesses associated withVANs’ processing FACNET transactions but stated that the cost of doingbusiness manually often meant the small business had to use an agent toreview physical bulletin boards—at potentially 1,400 separate DOD

sites—the only places where contracting opportunities under $25,000 wereposted.

Expected Benefits Not YetBeing Realized

In 1993, the National Performance Review stated that exchangingacquisition information with vendors electronically could result ingovernmentwide savings of up to $500 million per year, due to increasedcompetition and reduced federal paperwork. On the basis of agencies’reported experiences to date, FACNET has not resulted in the significantbenefits that were expected from using EC—savings in time and moneyand increased federal productivity.

For some FACNET procurements, agencies are reporting direct benefits,such as reduced contracting leadtimes, improved price competition, andan increased vendor base. More generally, however, government buyershave found that using FACNET to award contracts of $25,000 or less takeslonger and requires more resources than traditional methods. Theyattribute this, in part, to the frequent need to communicate by telephoneand fax with vendors to verify the receipt of a quote, answer questions, orinvestigate a vendor’s capabilities and those of its products. Further, theynoted that their efforts have been hampered by a lack of guidance on howto evaluate vendors’ responses, particularly when a substantial number ofquotes 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 forpurchases of $2,501 to $25,000 from an average of 3 days to more than 7days and required extra resources and effort. The Command officialresponsible for the comparison concluded that for this price range, thecost in time and effort far overshadows any small savings FACNET

produces. The Department of the Interior performed a similar test at fivebuying locations and got comparable results.

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


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The FAR Council adopted many of these recommended changes, as part ofthe proposed FAR Part 13 restructuring rule.21 The proposed rule wouldgive agencies greater flexibility in using FACNET, as OFPP recommended,including the authority to describe requirements using multiple brandnames for purchases under $25,000 and conduct more expeditedevaluation of vendors’ quotes or offers. Additionally, the proposed rulestates that agencies need not respond to inquiries (1) by telephone or fax,unless they are unable to receive inquiries through FACNET or (2) throughany medium (including FACNET) if doing so would interfere with theirability to conduct the procurement in an efficient manner. TheAdministrator said these changes were intended to address procurementoffices’ complaints that FACNET had increased both the resources neededto evaluate quotes and procurement leadtimes, compared with traditionalsolicitation methods. He said the changes were also intended to enhanceFACNET’s viability and increase agencies’ use of it.

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

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


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Figure 2: Reported Benefits ofFACNET Realized by Federal Agencies

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Source: Our analysis of 17 agencies’ responses. One agency, the Department of Commerce, didnot provide its views on this topic.

Concerns AboutFASA’s Requirementsfor FACNET

Federal officials responsible for FACNET stated that the basic conceptunderlying FACNET may not be sound. As mandated by FASA, FACNET focusesprimarily on competitive solicitations and new contract awards,22

requiring a federal agency to provide widespread public notice andexchange information with multiple vendors—not just one. As previouslynoted, FASA requires that FACNET provide (1) widespread public notice ofcontracting opportunities and (2) a means for private sector users to

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


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electronically access and review executive agency solicitations andrespond to them.

Federal officials said the concept, using EDI technology to focus primarilyon relatively low dollar value competitive contract awards to smallbusinesses, may not be the best solution for the procurements targeted.These officials noted that the concept was developed and pilot tested bythe executive branch and formed the basis for the FASA approach. Theconcept emphasizes the use of EDI, a technology that has been usedprimarily to support a high volume of routine “one-to-one,”23

computer-to-computer business transactions between organizations thathave established a close working relationship. Examples of suchtransactions include delivery orders under existing contracts and invoicesexchanged between a company and its regular suppliers. Commercialcompanies and some federal agencies have found that EDI technology canbe very effective when used in this way.

Three federal agencies that are using EDI successfully for one-to-onetransactions—the Defense Logistics Agency, GSA, and the Department ofVeterans Affairs—reported transmitting a total of about 840,000 deliveryorders and 517,000 invoices in 1995.24 The Administrator for FederalProcurement Policy stated that a lot of progress has been made in federalagency use of EDI technology for acquisition—but outside of FACNET—asshown by these three agencies’ efforts on one-to-one transactions.According to DOD, (1) the organizations currently processing theseone-to-one transactions are primarily utilizing proprietary solutions, ornoncompliant standards, and do not present a single face to industry atthis time and (2) maintaining and sustaining such actions are outside DOD’sInformation Infrastructure—“a FACNET compliant system.”

Because the technical and business requirements for such one-to-manytransactions differ significantly from one-to-one transactions, agenciesusing FACNET have not been able to benefit fully from the lessons learnedand from long-term familiarity with electronic delivery orders and invoiceson 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

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

24The three agencies reported transmitting through their own EDI (non-FACNET) systems thefollowing 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 and385,016).


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application of EDI, involving different business and technicalconsiderations than one-to-one delivery orders and invoices. Several OFPP,ECA-PMO, GSA, and other agency officials said that focusing FACNET’simplementation on competitive procurements has contributedsignificantly to FACNET’s problems and the skepticism that surrounds theexisting infrastructure. The Administrator for Federal Procurement Policyand other agency officials also told us that FASA’s requirement to focusFACNET principally on awarding relatively low dollar value contractscompetitively may not have been a good idea.

Leadership andManagementProblems

Implementation of FACNET on a governmentwide basis is a substantialundertaking that requires effective leadership and management to besuccessful. Since FACNET’s inception, significant technical, business, andpolicy issues have confronted the FACNET program, many of which havenot been resolved, delaying FACNET implementation. Agencies and vendorshave consistently cited the lack of clear leadership, direction, andadequate program management governmentwide as major reasons fordelays 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 aprogram manager for FACNET; and (3) provide for overall direction ofpolicy and leadership in, among other things, the development,coordination, and completion of FACNET implementation by executiveagencies. 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 implementFACNET and the presidential memorandum.

A governmentwide strategy for FACNET implementation has not beenclearly and convincingly communicated. Officials responsible for FACNET

implementation in their agencies stated that the governmentwide programhas been fragmented and uncoordinated. Neither OFPP nor the ECA-PMO

operates as a focal point of central guidance and governmentwideaccountability for FACNET. In effect, each agency is left to pursue its ownFACNET strategy.

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


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develop, implement, and use FACNET and other EC technologies in a mannerthat reflects the single face goal. As a consequence, the development anduse 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 privatesector have not been clearly linked. Another consequence is thatgovernmentwide priorities for FACNET have not been clearly established,communicated, and linked.

Since the early stages of implementation, agencies have consistently citedthe lack of clear leadership and governmentwide program management asmajor sources of problems and delays in the program. The results of aFebruary 1995 EC roundtable (in which over 20 federal agencies wererepresented) showed that the most significant concern of the participantswas leadership and support.

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

The key organizations responsible for FACNET—OFPP, DOD, and theECA-PMO—have not developed and put into place an effectivegovernmentwide management approach that includes (1) a clearly definedprogram structure; (2) multiyear planning that clearly establishesgovernmentwide implementation plans, anticipated results, and resourcerequirements and priorities; (3) systematic review and approval of keyFACNET projects; and (4) feedback and evaluation that identifies theprogress made and corrective actions needed. Information was alsounavailable on the total estimated costs of FACNET implementation—or itsmajor components (such as the infrastructure or CCR database)—or thegovernmentwide EC program.

The Administrator has acknowledged that there have been shortcomingsin management of the governmentwide FACNET program. Officials in OFPP

and the ECA-PMO told us they were aware of the agencies’ concerns aboutthe leadership and overall management of FACNET implementation. Theyacknowledge that the kind of program management and reportingdescribed above has not been developed and is needed. However, they


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observed that ad hoc funding and staffing of the ECA-PMO from executiveagencies has hampered effective program management efforts.

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

The shortcomings in governmentwide management of the FACNET programhave left important issues unresolved. For example, no convincingbusiness case has been made for governmentwide reliance on the currentFACNET infrastructure. Similarly, the lack of resolution of questionsconcerning the CCR database has impeded its implementation. DOD officialsresponsible for the database told us that even if better processes were putin place for gathering vendor information, benefits expected from sharingthis information across government procuring activities would still becontingent on policies and procedures being established concerningaccess to and ownership of the data gathered. OFPP, ECA-PMO, and DOD

officials responsible for FACNET and the CCR database told us that thefollowing obstacles to governmentwide EC must be resolved:(1) unanswered questions on who should have access to the CCR data andhow such data should be used by both the government and industry,(2) the absence of policy and procedures for implementing such agovernmentwide database, and (3) database security problems.

DOD officials responsible for the FACNET infrastructure, contractingofficials, VANs, and vendors stated that many operational problems stemfrom the lack of clear requirements for the acquisition function andoperational procedures that are needed to direct the development and useof the FACNET infrastructure and manage FACNET data. For instance,requirements for archiving data, accessing data, recording criticalacquisition information, and auditing FACNET transactions have not beenestablished, and both buyers and vendors have frequently cited the needfor an electronic date/time stamp, as well as clear requirements andprocedures to record receipt of vendors’ quotes by the government.


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With respect to VANs, FACNET implementation has been hindered byuncertainties regarding the government’s certification process, lack ofclear data management policies and procedures, and unresolved questionsabout VANs’ financial and technical responsibilities. VAN representativesand DOD officials responsible for VAN certification and oversight told usthat VANs have been operating without a clear understanding of theobjectives and requirements of the system. DOD is taking actions to addresssome of these issues. Specifically, DOD recently issued a revised VAN

Licensing Agreement; and some testing and procedural changes reflectedin this revised agreement may improve the VAN certification process.

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

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

A related issue is how to integrate FACNET and other EC technologies andpurchasing methods into a coherent EC strategy and implementationapproach for effectively carrying out agencies’ acquisition functions andachieving a single face to industry. Clear functional requirements, acoherent strategy, effective governmentwide leadership and programmanagement, and accountability are lacking.

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

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


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

We also recommend, if executive branch officials conclude that statutoryrequirements for FACNET—such as focusing it on providing widespreadpublic notice of contracting opportunities and exchanging informationwith multiple vendors—are impediments to the implementation of thegovernmentwide EC strategy, that the Director of the Office ofManagement and Budget seek legislative relief.

Agency Comments 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 inSeptember 1996—it was no longer experiencing operational problems withFACNET and the CCR system.

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

GSA stated that our findings are correct in targeting leadershipimprovements. GSA stated that there have been leadership challenges in theimplementation of FACNET as well as technical and procedural problemswith the use of EDI for public requests for quotation. GSA specifically notedthat (1) civilian agencies, in many cases, have not provided adequateresources, training, and vendor outreach required to successfullyimplement FACNET or EC in general and (2) the ECA-PMO has been hinderedby a lack of funding and staffing.

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


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implementation, and connect resources to results. OFPP said it iscontinuing to pursue the development of FACNET for use, whereappropriate, to streamline acquisition processes. OFPP said it is alsoconcerned that FACNET and all procurement policies offer realimprovements in serving the user and meeting the important missionsentrusted to government in a cost-effective way.

Both GSA and OFPP stated that they are working together and with otheragencies, which includes participation by the President’s ManagementCouncil, to address the leadership and policy direction concerns raisedand to develop a new EC management framework. OFPP also stated that ithas taken steps to develop and implement that framework to betterintegrate EC throughout government. In addition, GSA said this newmanagement structure will be put into place over the next several months,will bring a better focus and problem resolution to the program, will becross-functional, and will be able to better review EC programs andprovide more long-range planning.

DOD described recent enhancements it has made to FACNET’s infrastructureand the CCR system and stated that it was no longer experiencingoperational problems. These enhancements included implementing (1) theElectronic Commerce Processing Nodes on November 1, 1996, to improvethe FACNET infrastructure’s throughput and accuracy and (2) a World WideWeb site and dial-up modem capability on October 1, 1996, which allowsvendors to register for free in the CCR database. DOD added that it is in theprocess of developing a strategic plan to increase the CCR population in1997.

In addition, DOD described other enhancements. For example, it stated thatit has recently completed an EC Strategic Plan that encompasses allfunctional 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 singleface to industry and allow the maximum exchange of data betweenfunctional areas. DOD also said it is finalizing an EC directive thatestablishes roles and responsibilities throughout the Departmentpertaining to the implementation of EC in all functional areas.

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


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other major federal procuring agencies to assist them in their developmentof independent strategies and the overall federal EC strategy for federalprocurement.

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

Scope andMethodology

To address our objectives, we asked EC program managers andcomparable agency officials at DOD, its four major buying components, and18 federal civilian agencies to give us information and observations ontheir agencies’ efforts to implement FACNET. We sent a Data CollectionInstrument (DCI) to 23 federal organizations; 18 responded to our questionsfrom late March through May 1996. The DCI specifically asked for agencydata and information related to (1) current FACNET operations, (2) currentand potential FACNET procurement transactions, (3) benefits from usingFACNET, (4) obstacles to governmentwide implementation of FACNET,(5) potential use of FACNET for simplified acquisitions, and (6) changesneeded in the FACNET development and implementation strategies. Whennecessary we conducted follow-up interviews with respondents to clarifyDCI responses and obtain additional information.

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

To address the problems and benefits of FACNET, FASA’s requirements forFACNET, 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 implementationstrategies and practices of other public and private organizations and(2) the goals, objectives, and milestones established for FACNET by FASA andestablished for the governmentwide EC program by the October 26, 1993,


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presidential memorandum on streamlining procurement through EC. Wereviewed FACNET guidance, implementation plans, schedules, transactiondata, and status reports prepared by OFPP, the ECA-PMO, the DOD EC Office,and the Defense Information Systems Agency. To further assess progressand obstacles, we interviewed VAN representatives; FACNET vendors; andsenior OFPP, DOD, and GSA officials responsible for the governmentwideFACNET 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 inaccordance with generally accepted government auditing standards. Weperformed our work primarily in the Washington, D.C., area at OFPP in theOffice of Management and Budget, the DOD EC Office in the Office of theDeputy Under Secretary of Defense (Acquisition Reform), the DefenseInformation Systems Agency, and the ECA-PMO.

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

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

Louis J. RodriguesDirector, Defense Acquisition Issues


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List of Congressional Committees

The Honorable Ted StevensChairmanThe Honorable John GlennRanking Minority MemberCommittee on Governmental AffairsUnited States Senate

The Honorable Strom ThurmondChairmanThe Honorable Sam NunnRanking Minority MemberCommittee on Armed Services United States Senate

The Honorable Christopher S. BondChairmanThe Honorable Dale L. BumpersRanking Minority MemberCommittee on Small Business United States Senate

The Honorable William F. Clinger, Jr.ChairmanThe Honorable Cardiss CollinsRanking Minority MemberCommittee on Government Reform and Oversight House of Representatives

The Honorable Floyd D. SpenceChairmanThe Honorable Ronald DellumsRanking Minority MemberCommittee on National Security House of Representatives

The Honorable Jan MeyersChairwomanThe Honorable John J. LaFalceRanking Minority MemberCommittee on Small BusinessHouse of Representatives


Contents

Letter 1

Appendix I Respondents to OurData CollectionInstrument

28

Appendix II FACNET Transactions

29

Appendix III Agency Responses toOur Questions AboutFACNET

32

Appendix IV Comments From theNational Aeronauticsand SpaceAdministration

35

Appendix V Comments From theGeneral ServicesAdministration

36

Appendix VI Comments From theOffice of FederalProcurement Policy

38


Contents

Appendix VII Comments From theDepartment ofDefense

40GAO Comments 45

Appendix VIII Major Contributors toThis Report

46

Tables Table II.1: FACNET Transactions, January-December 1995 30Table II.2: FACNET Transactions, January-March 1996 31Table III.1: Responses Concerning Future Use of Various EC

Tools or Methods, Including FACNET32

Table III.2: Number of Responses Concerning Obstacles toFACNET Implementation

33

Table III.3: Responses Concerning Benefits of FACNET 34

Figures Figure 1: Agency Views on Relative Importance of VariousElectronic Procurement Methods

6

Figure 2: Reported Benefits of FACNET Realized by FederalAgencies

15

Abbreviations

CCR Central Contractor RegistrationDCI Data Collection InstrumentDOD Department of DefenseEC electronic commerceEDI electronic data interchangeECA-PMO Electronic Commerce Acquisition Program Management

OfficeFAR Federal Acquisition RegulationFASA Federal Acquisition Streamlining Act of 1994FACNET Federal Acquisition Computer NetworkGSA General Services AdministrationNASA National Aeronautics and Space AdministrationOFPP Office of Federal Procurement PolicyVAN Value-Added Network


Appendix I

Respondents to Our Data CollectionInstrument

We sent a data collection instrument to 23 federal organizations. We askedelectronic commerce program managers and comparable agency officialsat Department of Defense, its 4 major buying components, and 18 federalcivilian 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 lateMarch 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, andOffice of Personnel Management.

Five other agencies were sent data collection instruments but did notrespond. According to data provided by the Electronic CommerceAcquisition Program Management Office and several individual federalagencies, these five agencies accounted approximately 0.3 percent ofFACNET procurement actions in fiscal year 1995. (See app. II.) The fiveagencies were

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


Appendix II

FACNET Transactions

Table II.1 shows, for calendar year 1995, the number of FACNET

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


Appendix II

FACNET Transactions

Table II.1: FACNET Transactions, January-December 1995Contract solicitations Procurement actions

Agency Public RFQsOther than

public RFQsResponses to

solicitationsPurchase

ordersDelivery

orders Value of orders

Agriculturea,b 92 10 64 49 0 $529,017

AIDa,c 0 0 0 0 27 f

Commerced 456 0 2,891 184 0 2,558,250

Defensed 66,116 41,057 478,894 105,217 4,698 f

Education 66 0 253 21 1 55,686

Energyd 117 149 762 186 13 1,078,968

EPA 42 0 18 0 0 0

FEMAa,c 0 0 0 0 0 0

GSAd 5 0 2 0 0 0

HHSd 148 10 166 32 1,635 118,722,728

HUD 0 0 0 0 0 0

Interiore 1,682 87 6,566 577 20 4,479,054

Justice 83 0 139 17 0 45,501

Labord 0 10 0 0 0 0

NASAd 12 17 0 0 0 0

OPM 27 0 11 0 0 0

SBAa,b 0 0 0 0 0 0

Statea,b 81 10 180 28 0 163,483

Transportationa,b 67 0 102 43 0 347,957

Treasurya,b 299 0 1,462 242 1 3,240,276

VAd 0 0 0 0 0 0

Total 69,293 41,350 491,510 106,596 6,395 $131,220,920f

aData not verified by agency.

bAgency did not respond.

cAgency not sent a data collection instrument.

dCorrected data provided by agency.

eInterior did not have data from the Defense gateway to report for October-December.

fDOD 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 datafrom the Departments of Commerce, Defense, Energy, Housing and Urban Development, Healthand Human Services, Labor, and Veterans Affairs, Defense Logistic Agency, General ServiceAdministration, and National Aeronautics and Space Administration.


Appendix II

FACNET Transactions

Table II.2: FACNET Transactions, January-March 1996Contract solicitations Procurement actions

Agency Public RFQsOther than

public RFQsResponses to

solicitationsPurchase

ordersDelivery

orders Value of orders

Agriculturea 17 0 2 0 0 $0

AIDa 0 0 0 0 0 0

Commerce 58 0 639 21 0 284,000

Defensea 22,335 28,987 363,932 17,069 0 �— c

Education 0 0 0 3 0 23,649

Energyb 86 20 776 60 2 631,983

EPA 13 0 16 0 0 0

FEMAa 0 0 0 0 0 0

GSA 0 0 0 0 0 0

HHSb 73 7 282 12 736 53,396,540

HUD 0 0 0 0 0 0

Interior 645 0 1,883 222 0 1,584,508

Justice 18 0 0 0 0 0

Laborb 0 6 0 0 0 0

NASAb 2 0 60 1 0 �— c

OPM 2 0 0 0 0 0

SBAa 0 0 0 0 0 0

Statea 31 0 189 10 0 99,554

Transportationa 12 0 79 13 1 94,716

Treasuryb 55 84 101 17 0 234,478

VA 0 0 0 0 0 0

Total 23,347 29,104 367,959 17,428 739 $56,349,428c

aData not verified by agency.

bCorrected data provided by agency.

cDOD and NASA did not report the value of their orders. Consequently, the total value of ordersreported is underestimated, most likely significantly.

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


Appendix III

Agency Responses to Our Questions AboutFACNET

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

Table III.1: Responses Concerning Future Use of Various EC Tools or Methods, Including FACNETQuestion: To what extent doyou expect these EC “tools”to be important to youragency through 1999?

To little orno extent

To someextent

To amoderate

extentTo a great

extentTo a very

great extentDo not

know Total

A. FACNET 0 4 4 4 3 2 17a

B. Some AlternativeGovernment EC Solution

2 3 3 1 4 4 17a

C. Internet 1 2 3 4 6 1 17a

D. Agency-Unique System(s)or Architecture

10 0 2 2 0 3 17a

E. Your Agency’s ElectronicBulletin Board

8 1 2 2 1 3 17a

F. Electronic Catalogs 1 0 7 4 4 1 17a

G. Other 0 0 0 0 2 0 2b

aOne agency did not reply to this question.

bAgency officials not required to respond.

Source: Our analysis.


Appendix III

Agency Responses to Our Questions About

FACNET

Table III.2: Number of Responses Concerning Obstacles to FACNET ImplementationQuestion: To what extent, if at all, is eachan obstacle to your agency’s efforts toimplement FACNET?


To someextent

To amoderate

extentTo a great

extentTo a very

great extent Total

A. Lack of funding needed 7 7 0 1 3 18

B. Lack of other resources needed 3 7 3 3 2 18

C. Lack of effective leadership within youragency

14 4 0 0 0 18

D. Lack of effective policy leadershipoutside your agency

2 2 2 5 7 18

E. Lack of effective government-wideprogram management

1 2 2 7 6 18

F. Lack of effective FACNET engineeringand operational management

1 2 1 2 12 18

G. Lack of a sound FACNET infrastructurethat works “end to end”

0 0 3 3 12 18

H. Lack of a CCR database that is wellpopulated and operational

0 0 1 4 12 17a

I. Lack of a clear definition of “single face toindustry”

3 1 5 3 6 18

J. Lack of a well-defined federal strategy foruse of FACNET

3 4 6 1 4 18

K. Lack of well-defined FACNET strategy inyour agency

16 2 0 0 0 18

L. Lack of consistent, helpful, or practicaloutreach information for vendors

2 5 3 3 4 17a

M. Lack of integration of FACNET into youragency’s systems

13 3 1 1 0 18

N. Lack of data security 10 4 3 1 0 18

O. Use of EDI has made the FACNETdevelopment or simplified acquisitionprocesses more difficult

7 4 2 4 0 17a

P. Fragmented standards implementation 3 4 5 3 3 18

Q. Obstacles caused by the statutoryrequirements for FACNET

7 4 3 2 2 18

R. Other management, operational, legal, orpolicy problems

0 0 0 1 2 3b

aOne additional response was marked “unknown.”

bAgency officials not required to respond.



Appendix III

Agency Responses to Our Questions About

FACNET

Table III.3: Responses Concerning Benefits of FACNETQuestion: To what extent is each adirect/indirect benefit that has been or isbeing realized in your agency from federalefforts to implement FACNET?


To someextent

To amoderate

extentTo a great

extentTo a very

great extent Total

A. Saving money 7 4 3 1 2 17a

B. Reduced processing time 8 3 4 1 1 17a

C. Increasing competition/small businessopportunities

5 5 2 3 2 17a

D. Better management information 10 3 2 1 0 16a,b

E. Improved payment process 13 2 0 1 0 16a,b

F. Increased productivity of agencypersonnel

8 4 1 1 1 15a,c

G. Policy lessons learned that will likelybenefit the government in the future

4 3 3 5 2 17a

H. Technical lessons learned that will likelybenefit the government in the future

2 3 3 5 4 17a

I. Enhanced EC-related knowledge, skills,or abilities of federal personnel that willlikely benefit the government in the future

2 2 6 4 3 17a

J. Fostered better cooperation and/orcoordination between the EC andacquisition organizations

5 6 4 0 2 17a

K. Forced or encouraged federal agenciesto better manage EC efforts

3 4 4 2 4 17a

L. Promoted EDI in the government 1 7 1 4 4 17a

M. Other 0 0 0 0 2 2d

aOne agency official did not respond.

bOne additional response was marked “unknown.”

cTwo additional responses were marked “unknown.”

dAgency officials not required to respond.



Appendix IV

Comments From the National Aeronauticsand Space Administration


Appendix V

Comments From the General ServicesAdministration


Appendix V

Comments From the General Services

Administration


Appendix VI

Comments From the Office of FederalProcurement Policy


Appendix VI

Comments From the Office of Federal

Procurement Policy


Appendix VII

Comments From the Department of Defense

Note: GAO commentssupplementing those in thereport text appear at theend of this appendix.

See comment 1.

Now on page 2.See comment 1.


Appendix VII


See comment 2.




Appendix VII







Appendix VII


See comment 1.




Appendix VII



Appendix VII


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

GAO Comments 1. We made changes to the report to reflect DOD’s comments.

2. Through the completion of our audit work in September 1996, agenciesand vendors continued to identify operational problems with theinfrastructure and the CCR database. Although DOD stated that it was notexperiencing any operational problems as of late November because ofrecent enhancements, we believe insufficient time has elapsed to verifywhether the operational problems have been eliminated.

3. According to the Director for DOD EC, as of December 5, 1996, DOD hasnot issued policy guidance on the use of faxes pertaining to FACNET

solicitations.


Appendix VIII

Major Contributors to This Report

National Security andInternational AffairsDivision, Washington,D.C.

Kevin M. TanseyPatricia D. SlocumThomas W. Hopp

Accounting andInformationManagement Division

Carl M. UrieGwendolyn A. Dittmer

Office of GeneralCounsel

John A. Carter

(705121) GAO/NSIAD-97-26 Acquisition ReformPage 46

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