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NBSIR 78-1487

A Cost Benefit Analysis of

Proposed Federal Input/Output

Channel Level Computer

Interface Standards

Institute for Computer Sciences and Technology

National Bureau of Standards

June 1978

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78-1487

U.S. DEPARTMENT OF COMMERCE

NATIONAL BUREAU OF STANDARDS

SfaffoiwT Boreas of Standards APR 1.7 1979

00 1 ACc -(IaP

NBSIR 78-1487

(

A COST BENEFIT ANALYSIS OF

PORPOSED FEDERAL INPUT/OUTPUT

CHANNEL LEVEL COMPUTER

INTERFACE STANDARDS

Institute for Computer Sciences and Technology

National Bureau of Standards

June 1978

U.S. DEPARTMENT OF COMMERCE, Juanita M. Kreps, Secretary

Dr. Sidney Harman, Under Secretary

Jordan J. Baruch. Assistant Secretary for Science and Technology

NATIONAL BUREAU OF STANDARDS, Ernest Ambler, Director

PREFACE

This analysis has been conducted using the best information available to the NBS

Institute for Computer Sciences and Technology. Should additional relevant information

be made available at a later time, this analysis may be suitably revised to take that

information into account.
'sm
TABLE OF CONTENTS

Page

1.0 EXECUTIVE SUMMARY 1

2.0 INTRODUCTION 2

3.0 ANALYSIS 4

3.1 Methodology 4

3.2 Savings Calculation Model 7

3.3 Projected Savings 12

3.4 Sensitivity of Projected Savings to Parameter Variation 15

4.0 CONCLUDING REMARKS 16

REFERENCES 17

APPENDIX: Parameter Values 18

1.0 EXECUTIVE SUMMARY

This report provides a quantitative analysis of the projected Federal cost savings

that will accrue through the adoption of proposed Federal input/output (I/O) channel

level computer interface standards. The cost savings will result primarily from use of

these standards to make possible competitive procurement of computer peripheral equipment

that cannot now be procured fully competitively. Cost savings in the procurement of new

Federal automatic data processing (ADP) systems as well as in the subsequent augmentation

of such systems with additional peripheral equipment are considered.

This analysis concludes (figure 4) that the Federal cost savings will be $9.3 to

$13.7 million each year from FY 1980 through FY 1984, resulting in a total net savings

for this period of over $55 million (expressed as net present value for 1978 as a base

year with a discount rate of 10%).

1
2.0 INTRODUCTION

This analysis characterizes the magnitude of the major source of projected cost

savings that will accrue to the Federal Government through adoption of proposed Federal

input/output (I/O) channel level computer interface standards. Three of these standards

are being proposed as Federal Information Processing Standards by an announcement in the

Federal Register in June 1978. These are the proposed standards for I/O Channel Interface,

Channel Level Power Control Interface, and Operational Specifications for Magnetic Tape

Subsystems. The Government is also stating its intent to propose a standard for operational

specifications for magnetic disk subsystems within the next twelve months. This analysis

applies to the expected impact of these four interrelated channel level interface standards

as the basis for the interconnection of competitively procured magnetic disk and magnetic

tape peripheral subsystems as a part of Federal ADP systems.

Specifically, the analysis addresses the expected cost savings that will result from

use of these standards to support the fully competitive procurement of computer magnetic

tape and disk peripheral equipment where this is not now possible. Such competitive

procurement is expected to satisfy the Government's requirements for peripheral equipment

at significantly lower cost. Cost savings both in the procurement of new Federal ADP

systems as well as in the subsequent augmentation of these systems with additional

peripheral equipment are considered.

The emphasis is on projecting net cost savings at the time of acquisition of computer

peripheral equipment. Operational and maintenance costs over the life cycle of the

peripheral equipment and consideration of its residual value are not directly addressed.

The fully competitive procurement of magnetic tape and disk peripherals through use of

these proposed standards will result, in many cases, in the establishment of multi-vendor

Federal ADP installations. Based on the best available information, there is no evidence

that the operational and maintenance costs for multi-vendor ADP systems differ significantly

from those for single vendor systems. This analysis thus assumes that the effects of

operational and maintenance costs and equipment residual values do not change in any

major way the projected savings calculated in this analysis at the time of computer

peripheral acquisition.

2
An applicable life cycle analysis has been performed by the General Services Administration (GSA) in support of an overall joint NBS and GSA effort to develop and implement

effective I/O peripheral interface standards (reference 9). That analysis provides a

life cycle comparison of multi-vendor versus single vendor ADP systems. The GSA life

cycle cost analysis supports the basic premise that the operating and maintenance costs

and the effect of residual value do not significantly detract from the estimated cost

savings at the time of acquisition of computer peripheral equipment procured on a fully

competitive basis.

3
3.0 ANALYSIS

3.1 Methodology

Net Federal cost savings are projected for each fiscal year for which these standards

are expected to have a substantial impact. For each year, the cost savings in the

procurement of peripherals as a part of new ADP systems are added to the savings during

that year through peripheral augmentation of ADP systems. This sum is then reduced by

the projected cost to the Government for assuring required compatibility during that

year. Each year's net savings are discounted using present value methods to take into

account the time value of money.

The calculation of projected savings in ADP system procurement is shown graphically

in figure 1. The value of ADP systems estimated to be procured in fiscal year "i" is

designated by the variable VALSYS^ . The dollar value of computer peripherals estimated

to be procured as a part of new ADP systems that year is computed by multiplying VALSYS^

by the fraction by dollar value of Federal ADP systems represented by peripheral equipment

(FRPER). Multiplying this value by the fraction by dollar value of peripherals represented

by magnetic tape and disk equipment (FRSTD) gives the value of such tape and disk equipment

to be procured each year. This value of tape and disk peripheral equipment is multiplied

by the fraction by dollar value of peripheral equipment that can not currently be procured

fully competitively (FRCOMP). This gives the dollar value of tape and disk peripheral

equipment acquired each year that is the principal target for savings through use of the

proposed interface standards. Finally, this value is multiplied by the percent savings

projected through full competition (FRSAV) to give the projected savings.

The four channel level interface standards being considered provide for full compatibility in the connection of magnetic tape and disk peripheral equipment as a part of

ADP systems. Line printers and other peripheral devices are not included. Although the

I/O Channel Interface standard is necessary to support line printer interconnection on a

fully compatible basis, an operational specification standard for line printers will

also be necessary for that class of peripherals. Such a standard is another in the

planned family of Federal I/O interface standards.

4
Graphical Representation of

Projected Gross Annual Savings in Procurement of ADP Systems

Figure 1

5
It is useful to note that these particular I/O interface standards are anticipated

to have the desired cost savings impact only in the procurement of medium and large

scale ADP systems and in the procurement of peripherals typically used as a part of such

systems. The values for projected ADP system procurement for each year (VALSYS^) have

thus been suitably chosen to match those classes of systems for which these standards

are applicable.

The cost at the time of procurement that will partially offset these projected cost

savings is expected to be primarily part of the cost of adapting computer systems not

initially designed to employ interfaces that conform to these standards so that they are

in conformance. In this analysis, a conservative approach is taken toward estimating

the net cost savings. Thus, the Federal Government is assumed to bear, as a result of

the competitive procurement process, all of the costs associated with providing adaptor

hardware and software where necessary to make equipment conform to these standards when

the Government procures systems that were not initially designed to conform to the

standards. A large number of computer system manufacturers already offer all or some of

their systems with interfaces that conform to these standards. In competition with

these currently conforming systems, some or all of the manufacturers currently offering

nonconforming equipment may choose to pass along to the Government none or only a portion

of the cost of providing such adaptor hardware and software. In addition, some systems

will probably be modified to conform with these standards through substitution of conforming

equipment, e.g., channels, in place of non-conforming equipment that is no longer required.

There will be other costs to the Government at the time of procurement associated

with the use of these standards to assure full competition in the procurement of computer

peripheral equipment. These costs include the evaluation of multiple offers in the

competitive selection process and costs associated with verifying that the offered and

delivered equipment has interfaces that conform with the interface standards. These

costs are estimated to be small compared to the cost of adaptor hardware and software.

6
3.2 Savings Calculation Model

The discounted net cost savings that will result from these proposed standards are

calculated using the model shown in figure 2. Figure 3 provides short definitions for

each of the model variables. The Appendix of this report contains a discussion of each

independent variable of the model.

Equation (1) of figure 2 is used to calculate the discounted net cost savings by

summing the annual savings for each fiscal year (ANSAV^.) over the applicable years and

applying a discount factor. Parameter FYEAR represents the first fiscal year that the

standards are expected to contribute to substantial cost savings, and parameter LYEAR

represents the last fiscal year that these standards are expected to contribute to

substantial cost savings. The discount rate is represented by parameter "r".

The annual savings, ANSAV . , is given in equation (2) as the sum of the savings that

year in ADP system procurement (SYSSAV^ ) and system augmentation through addition of

peripherals (AUGSAV^. ), and reduced by the cost of adaptor hardware and software (ADAPTCOST.. )

The value for each fiscal year of the projected savings in ADP system procurement

(SYSSAV^ ) is computed by multiplying the value of systems to be procured that year

(VALSYS.) successively by four fractions, FRPER, FRSTD, FRCOMP and FRSAV as has been

discussed in the previous section.

The value of the augmentation savings term (AUGSAV^ ) in equation (2) is calculated

in equation (4) in a manner similar to the successive reductions through multiplication

by fractions of equation (3). The dollar volume of magnetic tape and disk peripheral

equipment procured to augment Federal ADP systems in each fiscal year (AUGVAL.) is first

reduced by multiplying by the fraction by dollar value of that peripheral equipment that

cannot currently be procured fully competitively (FRCOMP). This annual value of procured

tape and disk equipment for which competition through use of these standards is expected

to result in savings is then multiplied by the percent savings projected to accrue through

full competition (FRSAV).

7
DISCOUNTED NET COST SAVINGS

LYEAR

S

ANSAV

i

i - 1978

i = FYEAR (1 + r)

ANSAV

i = SYSSAV

i + AUGSAV

i - ADAPTCOST^

SYSSAV. = VALSYS

i x FRPER x FRSTD x FRCOMP x FRSAV

AUGSAV

i = AUGVAEi x FRCOMP x FRSAV x

1 SV'S l"I

~Ie"

R

ADAPTCOST

i = NUMSYSi x FRNCOMP x FRADAPT x NADAPT x COSTADAPT

Savings Calculation Model

Figure 2
ANSAV

i

: Federal cost savings in fiscal year i

SYSSAV.:

i Savings in procurement of ADP systems in fiscal year i

AUGSAV

i

: Savings in peripheral subsystem augmentation and replacement

in fiscal year i

ADAPTCOST

i

: Cost of adaptors that enable systems to conform to these

standards in fiscal year i

FYEAR: First fiscal year that standards contribute to substantial

cost savings

LYEAR: Last fiscal year that standards contribute to substantial

cost savings

rDiscount rate

VALSYS

i

: Federal ADP system procurement costs in fiscal year i

FRPER: Fraction by dollar value of procured ADP systems represented

by peripheral equipment

FRSTD

Fraction by dollar value of peripherals represented by

magnetic tape and disk equipment

FRCOMP

Fraction by dollar value of peripheral equipment that cannot

currently be procured fully competitively

FRSAV

Percent savings projected through full competition (expressed

as a fraction)

AUGVAL .Dollar volume of peripheral equipment procured to augment

Federal ADP systems in fiscal year i

SYSLIFE: Expected useful life of Federal ADP systems

NUMSYS . : Number of ADP systems procured by the Federal Government in

fiscal year i

FRNCOMP: Fraction by number of Federal ADP systems for which peripheral

equipment cannot currently be procured fully competitively

FRADAPT: Fraction by number of ADP systems to be procured competitively

through use of these standards and for which adaptor hardware/

software is required

NADAPT: Average number of adaptors per ADP system for which such

adaptors are required

COSTADAPT: Cost of each adaptor

Short Definitions of Model Variables

Figure 3

9
The last factor in equation (4) represents a reduction of the augmentation savings

to zero during the first year that the standards are in effect, and to linearly increasing

amounts each year up to the final year the standard has effect. The increase each year

in this factor equals the inverse of the expected useful life of Federal ADP systems

(SYSLIFE). The effect of this factor is to gradually increase each year that portion of

the Federal inventory for which savings in augmentation will be possible. Essentially

all systems will have the capability for competitive peripheral augmentation if the

standards are in effect at the end of a period equal to the expected Federal ADP system

life. This representation provides a conservative approach toward projecting the savings

through augmentation, in that no cost savings are assumed until systems have been procured

in conformance with these standards so that their augmentation on a fully competitive

basis is guaranteed.

The standards are also applicable in the augmentation of ADP systems that were in

the Federal inventory prior to the effective date of these proposed standards, but the

additional savings through such application are not included in this model. The degree

of competitive peripheral augmentation that will be possible for these systems will be

dependent on the commercial availability of adaptor hardware and software for these

systems.

Equation (5) is used to calculate the cost of the adaptor hardware and software

(ADAPTCOST.) term in equation (2). The cost of adaptors depends upon the number of

adaptors that are required to make initially non-conforming ADP systems conform with

these standards. The number of such systems projected to be procured in each fiscal year

(NIJMSYS^. ) is used as a basis for this calculation. This term represents the cost of

adaptors for new ADP systems, and is thus consistent with equation (4), where savings in

augmentation are attributed only to the competitive procurement of peripherals for ADP

systems that are already in conformance with these standards. The number of systems is

reduced in equation (5) by two fractions in a manner similar to the form of equations

(3) and (4). The total number of systems projected to be procured each year is multiplied

by the fraction of such ADP systems for which peripheral equipment cannot currently be

procured fully competitively (FRNCOMP). That product is then multiplied by a fraction

representing those ADP systems for which adaptor hardware and software will be required

(FRADAPT). Note that in some cases it is expected that manufacturers of currently

10
non-conforming ADP systems will modify their systems so that they conform to the proposed

standards without the need for separately identifiable adaptor hardware or software.

The number of systems represented by the product of the first three factors of

equation (5) is then multiplied by the average number of adaptors per ADP system for

which such adaptors are required (NADAPT). This product is then multiplied by the

estimated cost of each adaptor (COSTADAPT).

11
3.3 Projected Savings

A computer program that embodies the savings calculation model of figure 2 has been

used to calculate the discounted net savings. The Appendix of this report contains a

discussion of the values used in this calculation for each of the independent variables

of the model. A best estimate has been generated for each parameter, along with likely

minimum and maximum values for use in determining the sensitivity of the results to

variation in individual parameters.

The results of the savings calculation using the "best estimate" for each independent

variable are given in figure 4. Parameter values are shown on the left of figure 5, with

the exception of the discount rate r, which has been assigned a value of 0.10, and the

systems life, SYSLIFE, which has been assigned a value of eight years.

The columns of figure 4 correspond to the individual terms of equation (2). The

rows correspond to each of the five years that these standards are expected to have

significant cost savings impact. An additional column headed "Undiscounted Net Savings"

that is not explicitly identified in the model has been added to this figure. This

column enables one to see the effect of discounting in determining the projected discounted

net cost savings of $55.7 million over the five year period.

12
GROSS SAVINGS

UNDISCOUNTED

NET SAVINGS

DISCOUNTED

NET SAVINGS

FISCAL

YEAR

SYSTEM

ACQUISITIONS

SUBSYSTEM

AUGMENTATION/

REPLACEMENT

ADAPTOR

COST

1980 21.4 — 4.8 16.6 13.7

1981 21.4 0.9 4.8 17.5 13.1

1982 16.9 1.9 4.8 14.0 9.6

1983 16.9 2.8 4.8 14.9 9.3

1984 18.9 3.7 4.8 17.8 10.0

FIVE YEAR

TOTALS

95.5 9.3 24.0 80.8 55.7

Best Estimate Results (in $ nil lions)

Figure 4

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14

Sensitivity

of

Results

to

Variations

in

Individual

Parameters
3.4 Sensitivity of Projected Net Cost Savings

to Individual Parameter Variations

Figure 5 shows the variation in the discounted net cost savings as a function of

varying each of the principal independent variables of the model. The $55.7 million

best estimate result is reduced under these conditions to as low as $23.2 million with a

reduction in parameter FRSAV by a factor of almost two.

The right column of figure 5 shows the elasticity of the projected savings relative

to each parameter. This gives a numerical indication of the sensitivity of the projected

discounted net cost savings to changes in each independent variable. Elasticities in

this list greater than one indicate that a small percentage change in that parameter has

a correspondingly larger percentage change in the discounted net cost savings. Parameters

FRPER, FRCOMP, FRSAV, and FRSTD, have the greatest individual effect on the results.

The other parameters generally have a much smaller effect. Parameters FYEAR and LYEAR

are special cases, in that they vary in relatively major steps over a small range.

Although the effect of varying these parameters is clearly shown in the minimum and

maximum columns of the Net Discounted Savings section of figure 5, computation of elasticity

for these parameters does not appear meaningful.

15
4. CONCLUDING REMARKS

In addition to the major source of savings projected in this analysis through use of

these standards to promote competitive procurement of peripheral equipment, additional

savings are likely to be accrued. One category of such savings is that expected through

more flexible reutilization of peripheral equipment in the Federal inventory. At the

present time, reutilization is possible only within the Federal Government's inventory of

a particular manufacturer's systems and peripherals for those systems. For example, tape

and disk drives that are a part of a large scale system from one manufacturer, and that

are no longer needed on the system for which they were procured, may be reused in the

augmentation of other similar systems of that manufacturer in the Federal inventory or in

the initial configuration of a new system from that manufacturer. These proposed standards

will enable the Government to reuse such available tape or disk drives on any medium or

large scale Federal ADP system.

The additional reutilization cost savings through increased flexibility in moving

peripheral equipment from system to system are difficult to estimate. The General Services

Administration projected in May 1977 that the savings from reutilization of ADP equipment

in the Federal inventory over the next five years would range from $3.1 million to $4.5

million per year. The additional reutilization savings resulting from these proposed

standards would be in addition to the projected savings of $55.7 million in peripheral

equipment procurement.

Another category of potential savings is that resulting through assured stabilization

over a limited number of years of the interface defined by these proposed standards.

This marketplace stabl il ization relative to Federal Government procurement of computer

peripherals should reduce the barriers for both new and current offerers of peripheral

equipment that are introduced by potential changes in all manufacturers ' peripheral

interfaces

.

16
REFERENCES

1. "National Bureau of Standards, I/O Channel Level Interface, Proposed Federal Information Processing Standards," Federal Register , June, 1978.

2. "Draft Proposed American National Standard Specifications for I/O Channel Interface,"

ANSI Document Number X3T9/600, Rev. 2.

3. "Draft Proposed American National Standard Specifications for Power Control Interface,"

ANSI Document Number X3T9/666, Rev. 2.

4. "Draft Proposed American National Standard Operational Specifications for Magnetic

Tape Subsystems," ANSI Document Number X3T9/780, Rev. 3.

5. "Inventory of Automatic Data Processing Equipment in the U. S. Government," GSA,

National Stock No. 7610-00-181-7284, December, 1976.

6. "Study of the Acquisition of Peripheral Equipment for Use with Automatic Data Processing Systems," Comptroller General of the U. S., GAO Report Number B-115369,

June, 1969.

7. "Administration of Public Law 89-306, Procurement of ADP Resources by the Federal

Government," 38th Report by the House of Representatives Committee on Government

Operations and Additional Views, October, 1976.

8. "Computers in the Federal Government: A Compilation of Statistics," NBS Special

Publication 500-7, June, 1977.

9. "Government ADP Installations Life Cycle Cost Analysis," Automated Data and Telecommunications Services, GSA, March, 1978.

10. "Remote Terminal Emulation Analysis: Government ADP Procurement Projection,"

Federal Computer Performance Evaluation and Simulation Center, Report Number NA-510-

021-GSA, Task 2, October, 1976.

11. "Assessment of Historical Cost Data Regarding the Effects of Competition on DOD/Military

Procurement Costs," J. D. Neate and M. A. Burgess, ARINC Research Corp., November,

1976.

17
APPENDIX: Parameter Values

A "best estimate" value for each independent variable of the savings calculation

model is identified along with a minimum and maximum value for each variable. The

rationale for these selected values for each parameter is discussed.

1. FYEAR: First fiscal year that standards contribute to substantial cost

savings.

The first year that these standards can reasonably be expected to have a

substantial impact in the Federal Government's procurement of computer peripherals

is FY 1979. This is based on approval of the proposed standard in late FY

1978, with an effective date in early FY 1979. It is much more likely that the

first substantial cost savings impact will be felt in FY 1980, considering the

time scale of Federal procurement solicitations, evaluations, and awards. This

value is thus used as the best estimate. This is also consistent with the

planned availability of an accompanying operational specifications standard for

magnetic disk, necessary to assure full interchangeabi 1 ity of magnetic disk

subsystems. Even if a delay occurs in implementation of these standards or

development of the disk operational specification standard, the delay should

still permit substantial impact in FY 1980. Therefore, a maximum value for the

FYEAR parameter is chosen as FY 1980.

2. LYEAR: Last fiscal year that standards contribute to substantial cost

savings.

Considering that these proposed interface standards are employed in several

very recently announced systems, including systems not scheduled for delivery

until FY 1980, the standard can easily be expected to have substantial cost

savings impact through FY 1984, the best estimate value for parameter LYEAR.

If the introduction of newer interfaces for systems that are announced over the

next few years occurs faster than expected, it may be desirable to significantly

change these standards or to rescind them, in which case FY 1982 may be the

last year of substantial savings impact.

18
Especially considering the lifetime of systems that will be installed over the

next two years under the provisions of these standards (about eight years), and

noting that augmentation of many of those systems over this period will benefit

from the provisions of these standards, the standards may continue to have a

projected substantial savings impact as late as FY 1987.

19
3. r: Discount rate.

The net cost savings are reduced using a discount rate that takes into account

the time value of money. A rate of 10% (parameter value 0.10) is employed as

an approximation to the long run opportunity cost of capital in the private

sector. This value is prescribed by the Office of Management and Budget in

Circular A-94.

4. VALSYS^ : Federal ADP systems procurement cost in fiscal year i.

The Federal ADP system procurement projections employed in this analysis are

shown in figure A-l. The data through FY 1983 are taken from the results of an

analysis performed for the General Services Administration (GSA) by the Federal

Computer Performance Evaluation and Simulation Center (FEDSIM) as a part of a

joint GSA/NBS project concerned with the use of remote terminal emulation in

the Federal ADP systems procurement process (reference 10). Although the

principal intent of that study was to provide a projection of the quantities

and costs of teleprocessing systems and services that the Government will

procure over the next several years, the data does provide a conservative

estimate of the dollar volume of medium and large scale computer systems to be

procured by the Federal Government during that period. FEDSIM selected that

data to "represent. . .most medium- to large-scale computer system product lines."

These projections are thus good approximations to the systems for which these

standards are applicable, generally systems having a fully configured value of

over $400K.

This data was initially generated by analysis of Federal agency planning information provided to the Office of Management and Budget in April 1976. Data from

the GSA-maintained inventory of Federal ADP equipment was also employed. In

addition, FEDSIM interviewed representatives of Federal agencies to review and

refine the initial ADP system procurement plan that had been developed for each

agency. These projections are for the expected dollar volume of ADP system

procurements each year, taking into account each reporting agency's requirements and the cost of meeting those requirements with ADP systems based on

technology available in that year.

20
FISCAL

YEAR

VALUE OF

SYSTEMS

($ MILLIONS)

NUMBER

OF

SYSTEMS

1979 244 120

1980 362 157

1981 362 157

1982 287 155

1983 287 155

1984 320 157

1985 326 160

1986 331 163

1987 337 166

Projected ADP Systems Procurement

Figure A-l

21
These data were actually provided for two year periods. Since no indication

was available of the division of projected procurement volume between the two

years, equal spending in each of the years, e.g. FY 1980 and FY 1981, is shown

in figure A-l. The values in figure A-l for FY 1984 through FY 1987 were

determined by linear regression based on the FEDSIM report values for the

earlier period FY 1979 through FY 1983. It should be noted however, that the

principal calculation shown in figure 4 is based only on data through FY 1984.

5. FRPER: Fraction by dollar value of procured ADP systems represented by

peripheral equipment.

Figure A-2 summarizes relevant data extracted from the GSA-maintained inventory

of Federal ADP equipment (reference 5). Line (1) shows the dollar value of

systems provided by each of the six specifically identified manufacturers and

in the aggregate for the others, giving a total as of June 1976 of $4,414

billion. Line (3) separately identifies the value of peripheral equipment in

the Federal inventory, by system manufacturer, and totaling $2.46 billion.

The percent of system inventory value represented by peripheral

equipment varies from manufacturer to manufacturer from 41% to 72%. In the

aggregate, 56% by dollar value of the entire inventory is represented by

peripherals. Examination of similar data for the previous two years also shows

a value of approximately 56%. The best estimate value for parameter FRPER is

thus taken as 56% (parameter value 0.56).

As reported to NBS by the International Data Corporation, a similar value for

the U. S. installed base of ADP equipment is slightly lower, 50%. This value,

50% (parameter value 0.50) is used as the minimum. A value of 60% (parameter

value 0.60), representing a similar deviation in the positive direction, is

used as a maximum.

22
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233

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123

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23
6. FRCOMP: Fraction by dollar value of peripheral equipment that can not currently

be procured fully competitively.

Referring again to figure A-2, multiple sources of supply for peripheral equipment do not currently generally exist for peripherals to be connected as a part

of computer systems provided by Burroughs Corporation, Control Data Corporation

(CDC) , Digital Equipment Corporation (DEC), and Honeywell Information Systems

(HIS). The percent of peripheral equipment in the Federal inventory by dollar

value represented by these four manufacturers is calculated by adding the first

four entries in line (5) of figure A-2, giving a total of 31%.

In general, alternate sources of supply exist for medium and large scale IBM

computer systems, principally through use of competitively selected equipment

available from requirements contracts negotiated by GSA. Use of these contracts

enables Federal agencies to achieve substantial savings in procuring peripherals

for IBM and IBM "plug-compatible" computer systems.

Also, although GSA does not have requirements contracts for UNIVAC large scale

computers, a number of Federal installations have been successful in competitively

procuring magnetic tape and disk peripheral equipment for UNIVAC systems. No

calculations were made on the 21% by dollar value of the Federal inventory

represented by the "other" category in figure A-2. Thus, the parameter values

based on assuring full competition in the procurement of peripherals for Burroughs,

CDC, DEC, and HIS systems represent a minimum percentage share by dollar value

that will be made fully competitive through use of these standards. Even if

these particular manufacturers do not maintain their current Federal market

share, the peripherals that are in this portion of the Federal ADP procurement

volume are expected to be procured fully competitively as a result of use of

these proposed standards. This accounts for a variety of marketplace scenarios,

including the possibility that one or more of these companies decide not to

market ADP systems conforming to these standards to the Government.

24
Figure A-3 shows that the summary by dollar value of the Federal inventory

represented by these four manufacturers has been stable for three recent

fiscal years. Thus, the percent by dollar value of the peripherals in the

inventory for these manufacturers can also be assumed to be stable. This

leads to a value for FRCOMP, as calculated on the previous page of 31% (parameter

value 0.31). The minimum value is also chosen as 0.31, and the maximum of

0.45 reflects the possible more extensive competition for peripherals by

including the 14% by dollar value of the Federal inventory represented by

UNIVAC peripherals.

7. FRSAV: Percent savings projected through full competition (expressed as a

fraction)

The percent savings likely to occur as a result of introducing competition in

the procurement of peripheral equipment otherwise available from a single

source of supply is indicated by recent GSA experience in the negotiation of

requirements contracts for computer peripherals procured on a competitive

basis for Government-wide use. A price for peripherals 40% to 50% below the

cost of procuring similar equipment from the ADP system supplier at GSA schedule

prices has generally been obtained in the past. This represents full competition

for particular classes of peripheral devices as opposed to limited negotiation

with individual vendors in establishing the GSA schedule prices, which are

only slightly discounted below commercial list prices.

In data provided by GSA to NBS in May 1977, an annual savings of over $9.5

million are projected on a "volume" in excess of $19.9 million per year for

the next five years based on current annual volumes. That is, the Government

will procure for $9.5 million each year on a fully competitive basis those

peripherals that would otherwise cost at least $19.9 million procured at

negotiated GSA schedule prices from the ADP system supplier.

25
BUR.,

CDC

DEC

&

HIS

26
These data are consistent with the results of a number of studies that have

been made of the effect of competition on military procurement costs, including

one report that summarizes several previous studies (reference 11). These

studies show that significant price reductions result from competition. They

show that reductions from 22% to 50% of the unit acquisition price may be

realized from competitive procurement, with the bulk of the evidence supporting

a figure in the 40% range.

Data reported by the General Accounting Office (GAO), accumulated during the

earlier years of availability of alternate sources of supply for ADP equipment

(reference 6), shows a purchase savings from alternate sources as compared to

system manufacturers of from 17% to 58% for tape drives and from 20% to 29%

for disk drives. The report further states that tape drives owned by the

Government at that time which initially cost $57 million could then be bought

from alternate sources for $31 million, representing a 40% cost savings. Such

savings were later capitalized on where the marketplace permitted, for IBM plug

compatible peripherals, through the use of GSA requirements contracts. However,

no such provision for competitive procurement for all medium and large scale

ADP systems has been possible before the availability of the proposed interface

standards.

Data reported in the recent GSA life cycle cost analysis (reference 9) show

that under the pressure of competition made possible by using the "defacto"

interface standard of IBM, not only have substantial savings been accrued in

the procurement of peripherals for IBM and IBM plug compatible systems, but

IBM has itself significantly lowered its peripheral prices relative to other

suppliers. The proposed interface standards are intended to extend these cost

savings through competitive peripheral procurement to all magnetic tape and

disk peripherals procured for applicable Federal ADP systems.

27
Based on the above, a best estimate value of 40 % (parameter value 0 . 40 ) has been

chosen for FRSAV. A minimum of 0.22 is employed, based on DOD experience, the

early GAO data, and data reported in the recent GSA life cycle cost analysis. A

maximum of 0.50 has been chosen, based on past GSA experience in the fully

competitive procurement of ADP peripheral equipment of the type that is directly

the subject of this analysis.

8. FRSTD: Fraction bv dollar value of peripherals represented by magnetic tape

and disk equipment

Based on data derived from a recent special search of the GSA-maintained Federal

ADP equipment inventory, 85% by dollar value of the peripheral equipment currently

in the Federal inventory is represented by magnetic tape and disk peripherals.

A value of 0.85 is thus used as both the best estimate and the maximum for

FRSTD, A slightly lower value, 0.75, is taken as a minimum. This is a reasonable

lower bound on the proportion of the value of peripherals associated with tape

and disk equipment if other peripherals do not drop in value as fast as tape

and disk over time.

9. AUGVAL..: Dollar volume of magnetic tape and disk peripheral equipment procureo

augment Federal ADP systems in fiscal year i.

The $19.9 million augmentation of IBM and IBM plug compatible tape and disk

systems on an annual basis through use of the GSA requirements contracts

represents approximately 33% by dollar volume of the total Federal inventory

annual augmentation. It is reasonable to estimate that the dollar volume of

augmentation of the remainder of the inventory is at a similar level, thus

giving a best estimate for AUGVAL

.j of $60 million. The uncertainty of the best

estimate value is represented by a maximum value of $80 million and a minimum

of $40 million. Since the augmentation value data that can be extracted from

the current data base representing the Federal equipment inventory is limited,

these values are used for all fiscal years (all AUGVAL^ ).

10. SYSLIFE: Expected useful life of Federal ADP systems.

The previously referenced FEDSIM Report (reference 10) provides an estimate of

8 years as the average lifetime of Federal ADP systems. This is generally

consistent with data informally available from other sources.

28
11. NUMSYS^. : Number of ADP systems procured by the Federal Government in fiscal

year i

The previously referenced FEDSIM Report (reference 10) provides the data shown

in figure A-l for fiscal years 1979 through FY 1983. The same background

information concerning this data as was described in the discussion of VALSYS^.

above is applicable here. The values for NUMSYS^. are those in the second

column of figure A-l, where the data for fiscal 1984 through fiscal 1987 have

been determined by linear regression based on the available data points for

earl ier years.

12. FRNCOMP: Fraction by number of Federal ADP systems for which peripheral equipment

cannot currently be procured fully competitively

Figure A-4 is a chart derived from the GSA-maintained Federal ADP equipment

inventory that shows by number of central processing units (CPU's) the same

breakdown as was given in figure A-3 by dollar value.

Here, as in the computation of FRCOMP above, those CPU's provided by Burroughs,

CDC, DEC, and HIS, totaling 38% by number of the Federal inventory, represent a

minimum on a numerical basis of the Federal inventory of the CPU's in the

Federal inventory for which these standards will support fully competitive

procurement. Note that this percentage has stayed relatively constant during

the three years shown in figure A-4. Further, because of the way data is

reported in the Federal equipment inventory on both a system and a CPU basis,

it is believed that this percentage is also valid as a percentage by number of

Federal ADP systems for which the Government can procure peripheral equipment

fully competitively. A value of 0.38 has thus been selected as the best estimate

for FRNCOMP, It is also selected as the minimum value for this parameter.

Adding the numerical proportion of the inventory represented by UNIVAC to this

value, since greater competition in the procurement of peripherals for UNIVAC

systems will also be possible, a maximum parameter value of 0.52 is obtained.

29
FISCAL

YEAR

BURROUGHS

LO

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30
13. FRADAPT : Fraction by number of ADP systems to be procured competitively through

use of these standards and for which adaptor hardware/software is

required

Assuming that the manufacturers who currently offer systems that are not in

conformance with the proposed standards do provide adaptor hardware and software

and continue to represent the same fraction of the Federal inventory as they do

now, all such systems may require adaptors, and thus a maximum value of

parameter FRADAPT of "1" has been chosen.

If this adaptor hardware and software is integrated into some of these systems,

if the offerers of these systems choose not to pass along all of the costs of

the adaptor hardware and software, or if not all of these offerers choose to

provide equipment to the Government, the fraction actually procured that require

adaptors will be less. A best estimate parameter value of 0.9 for FRADAPT has

been chosen. Should extensive integration of the adaptor hardware and software

take place, along with absorption of a significant portion of the cost of such

adaptors by currently nonconforming offerers, then a much smaller number of

systems will require adaptors, thus leading to a minimum value for parameter

FRADAPT of 0.33.

14. NADAPT : Average number of adaptors per ADP system for which such

adaptors are required

For many systems, one interface conforming to these standards will be adequate

for connection of tape and disk peripherals, since it provides for the attachment

of up to 256 peripheral devices. For reliability and I/O throughput purposes,

frequently at least two channel interfaces conforming to these standards will

be provided. Based on an examination of typical configurations for applicable

ADP systems, a best estimate for the average number of adaptors per ADP system

for those systems that require adaptors has been selected as 3, with a maximum

of 5 and a minimum of 2.

31
15. COSTADAPT: Cost of each adaptor.

Based on the cost for already produced adaptor hardware and software for two

systems, one for a commercially available product and one developed by the

Government, a best estimate value of $30K has been selected for parameter

COSTADAPT. A value of $50K as a maximum provides an upper limit. It has been

demonstrated that an adaptor can be produced for as low as $20K, the minimum

value. These data are generally consistent with those informally provided to

NBS by other sources as estimates for the cost of adaptor hardware and software

for other systems.

32
NBS-1 14A (REV. 7-73)

u.s. DEPT, of COMM. 1. PUBLICATION OR REPORT NO. BIBLIOGRAPHIC DATA

SHEET NBSIR-78-1487

2. Gov’t Accession

No.

3. Recipient’s Accession No.

4. TITLE AND SUBTITLE

A Cost Benefit Analysis of Proposed Federal Input/Output

Channel Level Computer Interface Standards

5. Publication Date June 1978

6. Performing Organization Code

7. AUTHOR(S) 8. Performing Organ. Report No.

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

10. Project/Task/Work Unit No. 6501125

11. Contract/Grant No.

12. Sponsoring Organization Name and Complete Address (Street, City, State, ZIP) 13. Type of Report & Period Covered

14. Sponsoring Agency Code

15. SUPPLEMENTARY NOTES

16. ABSTRACT (A 200-word or less tactual summary of most significant in formation. It document includes a significant

bibliography or literature survey, mention it here.)

This report summarizes the results of an analysis of the cost savings that are expected

to accrue to the Federal Government through use of four proposed Federal input/output

channel level computer interface standards. The analysis is based on the best

available data, and the results are intended to be a best conservative estimate of the

potential Federal Government cost savings that will occur through use of the proposed

interface standards to increase competition in the procurement of computer peripheral

equipment. The analysis concludes that the Federal Government will accrue cost savings

through use of this standard of over $55 million during the five year period beginning

in FY 1979.

17. KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first letter of the first key word unless a proper name; separated by semicolons)

Computer systems; computer standards; interface standards; computer peripherals.

18. AVAILABILITY [^tfnlimited

|

1 For Official Distribution. Do Not Release to NTIS

19. SECURITY CLASS

(THIS REPORT)

UNCL ASSIFIED

21. NO. OF PAGES

33

|

1 Order From Sup. of Doc., U.S. Government Printing Office Washington, D.C. 20402, SD Cat. No. 03

20. SECURITY CLASS

(THIS PAGE)

22. Price

| v^-Order From National Technical Information Service (NTIS)

Springfield, Virginia 22151 UNCLASSIFIED $4.50

USCOMM-DC 29042-P74
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