Meet The World's Klutziest Computer Buyer

Two years ago, the Environmental Protection Agency decided it needed a supercomputer--most likely one from Cray Research Inc.--to run complicated environmental models that could help refine clean-air standards. But makers of less powerful minisupercomputers, such as Convex Computer Corp. and Alliance Computer, convinced the EPA's congressional overseers that they, too, ought to have a shot at the contract. They relied on a 1984 statute, the Competition in Contracting Act, that puts even the tiniest computer supplier on equal footing with large makers in the $20 billion-a-year federal computer market. The law is supposed to help federal agencies get the best computers for the best price.

But look what happened: The EPA ended up spending $500,000 over 18 months to prove what it already knew--that minisupers just don't have enough oomph to run its programs. And now, it won't be able to award an $80 million contract for two supercomputers until June, 1992--a delay that's likely to cost U. S. industry millions of dollars. Because the EPA doesn't have the new supercomputers it wanted, it hasn't been able to show where pollution is less than anticipated and thus where emission rules might be eased, says Edward J. Hanley, a deputy assistant EPA administrator. Once again, rigid purchasing rules have shown their ability to produce "procedural silliness," as Hanley calls it. "The appearance of competition often seems to be more important than getting the best deal for the government in the least amount of time."

AGONIZING. Hanley's not the only one in Washington bemoaning such inefficiencies. A growing chorus of criticism can be heard in the capital, where agencies have to jump through innumerable hoops to get the high-tech gear they need. Protests by losers can delay contracts for years. To avoid waste, the system encourages--though doesn't require--awards to the lowest bidders. But agencies, fearful of recrimination from lawmakers seeking the next great procurement scandal, sometimes sacrifice quality in the process. The result: an agonizing system for both Uncle Sam and its suppliers. "I don't think you could find one person in a hundred who would say the system works very well," says Phil Kiviat, a senior vice-president at consultants ICF Information Technology Inc. in Fairfax, Va.

That's certainly not what congressional reformers had in mind. The 1984 bill put an end to the bad old days, when procurement officials funneled contracts to cronies or relied consistently on a single, favored supplier. It was intended to halt "wired" contracts, in which bid specifications are tailored to ensure that a favored supplier wins. Late last year, the House Government Operations Committee blasted the Navy for drafting a procurement request that all but guaranteed that IBM would get the award.

CLUMSY CURE. To avoid such abuses as wired contracts, the new law made it far easier for losing bidders to lodge a protest. The goal was to loosen the stranglehold that IBM and other big players had on the burgeoning government market. But despite the good intentions, critics, including Steven J. Kelman, professor of public policy at Harvard University's John F. Kennedy School of Government, say that the protest process has become one of the biggest obstacles to efficiency.

Just the threat ofprotest can tie up a contract or force the government to settle for older technology. Three years ago, for instance, the Bureau of Reclamation embarked on a $25 million project to modernize computers that handle payroll, personnel, and accounting tasks for itself and its parent, the Interior Dept. The bureau asked for bids on a contract that called for an IBM 3090-200E mainframe or its equivalent. But in the midst of the process, IBM came out with a faster mainframe, the 3090-S series. Eager for the latest technology, the bureau changed the requirements so it could get the new machine or something close to it.

Two other companies, Amdahl Computer Corp. and Vion Corp. in Washington (representing mainframe maker Hitachi Ltd.), immediately complained they couldn't meet the new specifications--their clones of the 3090-S weren't ready. Interior officials, fearing that the companies would haul them into court and delay the contract, went back to the original proposal. "We gave up because of the fear of protest from the other vendors," says Robert E. Ray, Interior's chief of computer acquisition. "We didn't want to get caught up in that." Federal Data Systems Corp., a systems integrator in Bethesda, Md., and ultimately supplied the older IBM equipment.

Procedural safeguards, from congressional oversight to the protest process, are obviously necessary, given the billions federal agencies spend on computer procurement (table, page 74). And scores of studies by Congress' watchdog agency, the General Accounting Office, show that purchasers break the rules regularly. But putting bureaucrats under the microscope can have perverse effects. "The fear that you might get criticized has produced this completely insane system," says Harvard's Kelman.

EXPENSIVE SAVINGS. Indeed, protecting bureaucratic backsides sometimes appears to be the main goal of the tangled procurement process. In April, for instance, the U. S. Geological Survey (USGS) awarded a contract worth up to $1.1 million for IBM-compatible disk drives to low-bidder Federal Systems Group Inc. (FSG) in Vienna, Va. Officials did so despite concerns over FSG's proposal to supply used Storage Technology Corp. disk drives and over its ability to service the equipment.

The Geological Survey's fears were well-founded: None of the drives the agency used worked. FSG President Daniel L. Retter insists that was an "anomaly." In any case, the acquisition achieved a key bureaucratic goal: By picking the low bidder, USGS insiders concede that they hope they bought protection from second-guessing later on.

Fears of such meddling aren't idle. The Justice Dept. is getting heavy flak for its June, 1989, award of a $180 million contract to Tisoft Inc. in Fairfax, Va., for a system that included Data General minicomputers, Wyse personal computers, and a network from 3Com Corp. Tisoft's network for tracking criminal and tax cases was up and running in less than two years, and U. S. Attorneys around the country rave about it.

But some lawmakers consider the contract an outrage. For one thing, the department didn't pick the low bidder because it considered Tisoft's product superior in function. What's more, the agency gave Tisoft $200,000 to help settle a protest lodged by Prime Computer, a payment that raised eyebrows on Capitol Hill. Now, House Judiciary Committee Chairman Jack Brooks (D-Tex.), author of the 1984 procurement law, wants to pull the plug on the deal. He complains that the department paid more than retail for 12,000 PCs and, in effect, paid hush money to cut off the protest process. "The department broke every rule in the book," fumes Brooks. Responds Harry H. Flickinger, Assistant Attorney General for administration: "We took great pains to make sure we did this procurement correctly." Using agency funds to help the winner fend off a protest may seem to subvert the process, but Flickinger says it's perfectly legal.

SETBACK. The Justice flap is bound to discourage other agencies from being so venturesome. And that could be a setback for reform. Industry critics say the flexibility that Justice showed is just what's needed to improve federal purchasing methods. And some government officials agree: In an Apr. 9 letter to agency and department heads, Alan V. Burman, the Office of Management & Budget's procurement-policy chief, urged agencies to mend their ways, complaining that the "government underemphasizes quality vs. price."

Congress is chiming in as well. Representatives John Conyers Jr. (D-Mich.), chairman of the House Government Operations Committee, and Frank Horton (R-N. Y.), the panel's ranking minority member, have introduced legislation aimed at curbing abuses in the protest process. By mandating that agencies provide detailed explanations of their selections, the bill would eliminate some challenges. And the system would be streamlined by cutting the time limit for filing an appeal from four months to one. Meanwhile, the General Services Administration has launched a program to train those who buy computers for the government to be smarter shoppers.

Winston Churchill once said that democracy is the worst form of government--except for all the others. The same may be true of the way Uncle Sam buys computers these days. The system is far from perfect, but it has curbed corruption and opened the market to a wider range of vendors. And if the latest proposals can curb bureaucrats' need to cover their backsides, it could become a very good system indeed.

      Agency              Expenditure, fiscal 1991
       ARMY                        $2.57
       NAVY                         2.39
       AIR FORCE                    2.23
       TRANSPORTATION               1.81
       NASA                         1.72
       DEFENSE AGENCIES             1.57
       ENERGY                       1.56
       TREASURY                     1.32
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