NBSIR 75-696

Proceedings of GSA/ETIP Symposium

on Procurement Practices

May 29-31, 1974

Experimental Technology Incentives Program

National Bureau of Standards

Washington, D. C. 20234

and

Federal Supply Service

General Services Administration

Washington, D. C. 20234

Final Report

January 1975

Prepared for

Experimental Technology Incentives Program

National Bureau of Standards

Washington, D. C. 20234
EXPERIMENTAL TECHNOLOGY INCENTIVES PROGRAM (ETIP)

The experimental technology development and application incentives

program was initiated in fiscal year 19 73 as part of the President's program to fund ways that the Government could stimulate

technological innovation. The objective of the program is to

learn how the Federal Government can provide policies and incentives which will encourage greater technological innovation in

the private sector. Broader application of innovative technology could lead to the amelioration of national problems.

The interrelation of the Government and private sector is complex and not enough is known to predict the effect on technological innovation of a change in government policy. Consequently,

various hypotheses regarding possible federal policy are being

tested with analyses and experiments. Considerations leading to

the initial selection of policy questions were: (1) areas in

which there exists considerable experience; (2) activities traditional to the Department of Commerce; (3) possible new partnership arrangements between Government and the private sector; and

(4) experience of foreign governments with technology incentives.

Four policy-related program areas have been identified for investigation and experimentation. The program areas refer to federal

procurement practices, federal regulatory practices, federal funding

of civilian R&D, and federal assistance to technologically based

firms. In each of these, new or modified federal policy will be

suggested in cooperation with responsible federal agencies

.

In addition to these policy questions, the program will conduct

analyses and exploratory studies to provide an improved basis for

choice of policy questions for future investigation as well as to

permit more effective direction and evaluation of the already selected policy questions.

The accompanying report was prepared as part of the ETIP program

of the National Bureau of Standards. Statements contained in

this document represent the views of speakers and do not necessarily reflect those of the National Bureau of Standards.

Director

Experimental Technology

Incentives Program

National Bureau of Standards

U. S. Department of Commerce
Proceedings of

GSA/ETIP SYMPOSIUM ON PROCUREMENT PRACTICES

May 29-31, 1974

Sponsored by

Experimental Technology Incentives Program

National Bureau of Standards

and

Federal Supply Service

General Services Administration

CONTENTS

Page

SPEECHES

Welcoming Remarks 1

Dr. Jordan D. Lewis

Opening Remarks._ 2* Honorable Arthur F. Sampson

Remarks 5

Dr„ Richard W. Roberts

Procurement from Government View 7

Mr. Michael J. Timbers

Keynote Address - Procurement from Industry View. ... 10

Dr. Lester C. Krogh

Procurement Experiments Conducted by ETIP 17

Mr. Ralph J. Barra

Closing Remarks 21

Mr. Michael J. Timbers

CONCLUSIONS

Summary 25

Recommendations 33

WORKSHOP REPORTS

ADP — Peripheral/Supplies 35

Automotive Products 39

Chemical 44

Containerization/Packaging 47

Electrical Equipment 49

Furniture 56

Instrumentation 59

Office Machines 65

Photographic and Audiovisual 70

GLOSSARY OF FEDERAL SUPPLY SERVICE TERMS 72

PARTICIPANTS/ATTENDEES 76

i

SPEECHES

SYMPOSIUM ON PROCUREMENT PRACTICES

Sponsored by

General Services Administration

and

Experimental Technology Incentives Program

of the

National Bureau of Standards

The purpose of the conference was to initiate a continuing

joint-government-industry effort to seek ways to encourage

technological innovation in the development of products purchased by the Federal Government.

WELCOMING REMARKS

Of

Jordan D. Lewis

Director

Experimental Technology Incentives Program

Good morning. Briefly, our agenda is as follows. We start

out with key remarks by Arthur Sampson, Administrator of GSA,

and Dick Roberts, Director of NBS , to set the tone for the

conference. We then have a talk by Mike Timbers, Commissioner of Federal Supply Service, on procurement from the

government's point of view followed by a talk by Les Krogh,

Vice President of the 3M Company, on procurement from industry's point of view. Following these talks, we will have a

description by Ralph Barra of ETIP of some very exciting

procurement experiments now underway in the Federal Government. Then capping off the morning, a general discussion

of the morning's subjects by a panel of government and

industry representatives.

Starting this afternoon we move into the real core of the

program: the "workshops." The workshops are co-chaired

by government and industry representatives . In order to

enhance the productivity of these workshops, the co-chairmen

have been working together since noon yesterday; they worked

all yesterday afternoon and much of last evening on preparing

for this afternoon and tomorrow.

Government purchases amount on the average to approximately

one percent of all civilian goods produced in the United

States. This ranges from ball point pens to lasers. The

1
government purchases of these goods have characteristically

followed the market, where heavy emphasis has been placed

on lowest cost. The consequence of this practice is that

the government does not always (perhaps not even generally)

receive the greatest value for its dollar. Recognizing

this, there is probably no better way to launch a serious

effort to change/to improve/to modify federal procurement

practices than to bring together as we have for today and

tomorrow the cream of the crop of those who sell to the

government and those who buy for the government to discuss

the opportunities ahead of us.

The purpose of this symposium then is to recommend federal

procurement policies and practices that could provide increased incentives for government and industry jointly to

pursue new and improved procurement practices. This is not

a modest effort. However, if these recommendations are

effectively adopted not only will the government get more

value for its dollar but industry might well be able to

look at government as a sort of guaranteed mini-market for

product innovation.

This symposium is part of a larger context. The Federal

Supply Service and the Public Building Service of GSA, the

Veterans Administration, and other major federal agencies

in cooperation with ETIP have begun over the past few months

using procurement incentives such as performance specifications and life cycle costing on an experimental basis to

determine how well such tools, such incentives, might

actually provide impetus for product innovations. The message here is that we mean business and that your contributions to this symposium have a good chance of being followed.

It is my pleasure and privilege at this time to introduce

the Honorable Arthur Sampson, Administrator of the General

Services Administration.

OPENING REMARKS

Of

Arthur F. Sampson

Administrator

General Services Administration

Good morning. I have another important meeting later this

morning when I appear before the Senate Appropriations Committee for my budget for next year. But I wanted to come

out here if only briefly because I wanted you to know that

I believe in this meeting. I believe in the philosophy behind it and its real chances for success.

2
The last decade or so has brought fundamental changes in the

operation of governments and businesses in this country. The

war in Vietnam shook some of our faith in our institutions.

The environmental movement made us conscious of our fragile

surroundings. Increasing population and rising expectations

around the world are making it harder to maintain our life

style. Inflation is no longer merely an inconvenience but

is now a real threat. Patient problem solving seems to have

given way to violent social action. And most recently, we

have had to face up to the material and energy shortages

that for the first time have put theoretical limits on our

growth and physical well-being as a country.

What all this adds up to is the need for a new way of doing

business. It is no longer adequate to do business as usual,

to produce goods or government services in a routine way.

Today we, all of us, are being asked to produce more, and

what we produce must directly help in solving our social,

environmental and other problems. Moreover, we've got to

do all this with less —less energy, less raw material, and

fewer real dollars.

Now that's a very lopsided equation. Something's got to

give. Well, fortunately there is an unknown in the equation, one factor that could allow us to meet the demands

of colleges, consumers, social activists and others who

require ever more products and services. And we could do

it in the face of strained physical and material resources.

How? The secret ingredient is productivity and creativity.

Finding new ways of using those products and services. And

that, of course, is what this meeting is about. You're not

here to solve all of our problems, but you are here to

develop the kind of government-business partnership that

can solve problems in the long run.

Let me give you an example of this kind of cooperative venture. In the past few years, we have completely revitalized

the building program at GSA in partnership with the construction industry. We listened to the industry to find out its

concerns. We sorted out the best innovative ideas in firms

and put them to work for us. We held important and productive conferences on energy conservation, fire safety, environmental and social aspects of building, and finally we

sent men out across the nation to sell to the industry the

changes we were making.

Out of this interactive process came a great many advances.

New construction management techniques, private financing

for public building, performance specifica^tions for office

buildings, new concepts like an energy budget for building,

and a fresh approach to fire safety. And finally, exciting

experiments such as our energy conservation test building

3
which may use 50 percent less energy than a conventional

building. Our environmental building, which will put recycling into process, will have a solar collector and a

public park on its roof.

The most important aspect of all these changes is this:

They were developed in partnership with industry. The process of developing new ideas and putting them to use was far

more rapid than if the government or business had tried it

alone. Even more important, the new ideas developed are

useful not just to the government, but to the entire industry.

You are here to establish the same kind of effort for GSA's

billion dollar procurement program. I can promise you for

GSA's part in this venture the same kind of open-minded

cooperation that characterized our efforts with the construction industry.

It won't be easy. Developing new ideas is never easy.

Improving on old ideas is still more difficult. And bear in

mind that when we set out to streamline government construction we were working primarily with one industry. When we

turn to the acquisition of commercial type items and services, we are talking about thousands of diverse industries

from paper clips to locomotives, each with problems as unique

as the products are different. Neither the ETIP program nor

this symposium offers a panacea for the myriad problems faced

by buyers and suppliers. But both offer us the opportunity

to begin a joint effort to overcome them. I hope you share

with me the sense of importance surrounding your efforts.

The philosophy of this effort is appropriate to our times.

The potential rewards are very real . And there are two

dangers we face if we do not develop a creative, problemsolving relationship between government and business.

For us in government there is the danger of doing business

as usual, without innovation or increased productivity. This

could bring about a loss of credibility—a widening gap between what our leaders promise and their ability to deliver.

For you in industry the danger of business as usual is no

less real. For you the danger lies in public regulation of

business. Unless you improve products and productivity

voluntarily you may have to do it on a crisis or crash basis

under government rules.

This three-way venture —NBS , GSA and industry working together and other efforts like it can avert those dangers.

This program by its nature accelerates research. It has a

built-in federal market to help put new ideas into use.

4
And it establishes the methods of voluntary governmentbusiness partnership to meet the new demands of the 70 's

and beyond.

So your symposium today is significant indeed* And I give

you my best wishes for success. Thank you.

REMARKS

by

Richard W. Roberts

Director

National Bureau of Standards

Thank you Jordan. I would like to add my welcome to all of

you as you spend your time this week here at the National

Bureau of Standards.

In his 1973 budget message. President Nixon called for better

ways to encourage private investment in technological change

in this country. I think the continuing search for those

better ways is really why we are here today and tomorrow.

Congress in responding to the President's challenge funded

a new program called "ETIP" and as you all know that stands

for Experimental Technology Incentives Program which is a

long name for a program this size in terms of dollars but

we expect this program will indeed have a major impact —an

impact much greater than the dollar resources that are going

into it. I think it is going to have a great deal of leverage both in the federal system and in the private sector.

I think being based here at NBS is not a bad idea. The

Bureau of Standards has been involved with technology and

technological change since it was founded in 1901. We are

concerned with science; the development of new knowledge,

and we are concerned with the application of that new knowledge in various sectors in this country to enhance productivity, to fill the basis for our industrialized society in

fact to even promote and encourage change. We are involved

with government agencies that we have been involved with

successfully for a number of years. We are also involved

with much of the private sector and I think the Bureau of

Standards has a fair amount of credibility in both camps.

So for this reason, I think the Bureau is a good home for , the ETIP program.

As you know, ETIP is presently concentrating its efforts in

three areas. One area of course is federal regulatory policy

and our prime purpose in this area is to determine if it is

possible to develop regulations that both protect the public

and at the same time encourage technological innovation. We

5
are also looking at ways to improve coupling federallyfunded R&D to the industrial sector and of course we are

here today to discuss our activities in the Procurement

Area

.

Now the main purpose of ETIP at least as we see it at the

moment is to develop effective methods by which the government can stimulate the process of technological change. In

order to develop and validate such methods, ETIP must try

out an actual practice some carefully chosen proposition in

short what we are saying is that we are having an experimental program and we are going to carry out these experiments in the real life world and we are going to try to use

the results of these experiments to develop new policy for

operating in the federal sector.

One proposition that we are exploring is: Can the federal

government through its vast purchasing power stimulate

industry to invest in technological change? You know $60

billion is a lot of leverage and if the government learns

to use that creatively we might see a great deal happening.

We feel that purchasing power indeed can be employed to

encourage technological change and that this change will

spill over into the civilian economy and have a major impact

there

.

Now echoing Mr. Sampson's words, I think it would be futile

for ETIP to develop policy for another agency without that

agency having a very large piece of the action. Similarly,

it would be futile for the Bureau of Standards and federal

agencies to work in isolation from industry because it is

really industry that we hope will respond by using new

technology in answering the various purchase requests that

go out from this great bureaucracy. We are delighted to

have you here today. I'm looking forward to participating

in your deliberations and I wish you a great deal of success.

6
PROCUREMENT FROM GOVERNMENT VIEW

by

Michael J. Timbers

Commissioner

Federal Supply Service, GSA

Jordan, thank you very much. I would also like to add my

welcome to the ones you have already received and say that

we are extremely pleased at the response which we have had

to this symposium^ and also extremely pleased at the talent

that we have assembled here for the next couple of days.

Traditionally, the government has trailed product development in industry. I think this has come about primarily

because of our system for establishing and maintaining

specifications. Our approach has been to develop our specs,

based upon existing products rather than upon the technological potential of the industries with which we do business.

We have not encouraged industry to bring the latest innovations to us. Consequently, we have lagged behind industry

and have done little to stimulate technology.

Because products must conform to our design specifications,

it is frequently not profitable for a manufacturer to introduce a new item which does not meet the established specs.

We would like to begin eliminating this situation. We would

like to lead industry for a change instead of following, and

we are convinced that the Federal Supply Service must take

a leadership role in revamping government procurement of

commercial type items, just as GSA's Public Buildings Service leads the way in revitalizing government procurement of

design and construction services.

We have begun taking steps to bring our system up-to-date.

Within the last year we have established a number of programs

and practices to design and modernize our program. For example, we developed an intensified marketing program to

determine the needs of our customer agencies and to determine how we can best satisfy those needs. We have established an active value management program to assure that

proposals and problems are given a thorough and systematic

examination no matter what the source of the proposal may

be, whether it emanates from a supervisor or a subordinate.

And we have begun applying the life cycle costing (LCC)

technique to procurement. Now the LCC concept shakes the

very foundation upon which government procurement practices

have rested for years; that is, the low responsive bidder

gets the contract. LCC looks at the total cost of ownership over the entire life of the item, the acquisition,

maintenance, repair, and disposal costs. Obviously we can't

apply LCC to every item in our system but' I can assure you

that where it is practical we are going to try to do it.

7
We will also be including value incentive clauses in our

contracts. These will enable contractors to share in savings

we realize as a result of innovations they make after the

contract is awarded. This should provide a stimulus for

the contractor to continuously improve his product or manufacturing process.

These are some of the major steps we have taken so far but

this is only the beginning. The largest step is the revamping of our system which is scheduled for implementation in July of next year provided that the necessary legis^

lation is passed. And this is industrial funding or full

cost recovery funding which will enable us to operate in

much the same manner as a commercial enterprise and recover

our operating and overhead expenses through the markeup on

the items we sell to our customer agencies. Industrial

funding should give us the flexibility to put our manpower

and dollars where they are most needed to ensure that our

customers are getting the latest products in the most timely

manner. Industrial funding gives us added incentive to

modernize our system because we now will be paying our own

way. We will have to do a better job in order to survive.

As Mr. Sampson emphasized, we are here today to establish

a productive working relationship, a partnership of sorts.

The ideas and proposals generated by the industry and

government representatives assembled for this symposium

are needed in our efforts to modernize acquisition practices. And I would like to briefly touch upon some of

my own thoughts on the subject. For example, I am sure

that most of you will agree on the desirability of performance specs over the traditional design specs. I am

equally sure that most of us are familiar with the problems which accompany performance specs. The expense and

time involved in developing tests and test methods, the

necessity of reproducible tests and the fact that the

performance specs can't be used for all items. There are

other possible solutions that come to mind for evaluating

new and improved products: the possibility of prototypes;

the idea of design competition in certain fields, for

example in furniture; and the use of panels to study

products offered for sale to the government. These

panels would augment broad performance specifications.

When I think on the overall subject of stimulating technology, I can't help but focus on a couple of problems

that face us. First, as much as we desire to provide

incentives for product innovation, we must always remember that fair competition is and always will be a basic

tenet of government procurement. Stimulating technology

8
without giving one contractor an edge or unfair advantage

over another is one of the challenges that faces us. In

this vein, perhaps we should take another look at our

definition of competitiveness. Life cycle costing has

broken us away from the strict dollar criterion but maybe

we can go further. Another problem we have is how to

ensure that small business participates in government

procurements. How do we ensure that small business, without the necessary R&D dollars, is not left out in our

efforts to stimulate new technology? I hope we give the

acquisition process a thorough examination in the next

two days. We have over a hundred representatives here from

over 6 0 organizations and if this group can't come up with

some meaningful conclusions and suggestions for stimulating

the procurement process, I'm afraid there is no help possible. But I am sure we can achieve these objectives and

I'm sure you wouldn't be here today if you didn't think

we could do many things to improve our acquisition process.

I wish you a very successful conference.

9
KEYNOTE ADDRESS

by

Lester C. Krogh

Vice President

Commercial Chemicals Division, 3M Company

Just a little while ago Mike Timbers said "flexibility in

procurement specifications is an absolute MUST if we are to

keep abreast of the latest technological innovations."

To that I must add, "and if we hope to achieve real success."

That principle was brought home to me very recently, when a

neighborhood Girl Scout approached my door. She wore full

uniform, and a face full of hope. She carried a well-stocked

sample case of famous Girl Scout cookies and an order blank.

Well, at this particular time in my life, I'm not quite as

svelte as I once was; and all I could see was hopeful little

girl carrying a sample case full of calories that I in no way

need. I was resigned to placing a charitable order, even

before she rang my doorbell.

Ladies and gentlemen, that Girl Scout turned out to be

please forgive me —a real sharp cookie I "Good evening, sir," she said, sizing me up immediately. "For

weight-watchers this year, we are also offering Girl Scout

celery I

Now, that '

s

flexibility!

And that's the kind of creativity that built this country.

And that little girl, who will leave college about 1985 or

so —and who undoubtedly will not leave her college the way she

found it —already has a job offer from me to sell whatever

products or services I may be connected with at that time I

I may have some doubts about what !_ might be doing in 1985,

but I have absolutely no doubts about her I You see, just a few years ago, I was Director of 3M's Central

Research Laboratories. Today, I'm Division Vice President

for the Commercial Chemicals Division of 3M Company. There

was a time when I never thought I would have responsibility

for sales, manufacturing, or any of the other orchestrated

grief with which I am currently saddled I

10
But I must admit it's fun. Mostly.

Permit me a few moments to tell you a little bit about 3M

Company, because an understanding of what makes 3M tick is

essential to some recommendations I will share with you

later on.

Back in 1902, 3M was five investors, and a site on Lake

Superior that they hoped was rich in corundum, which they

hoped to mine and" sell for abrasive applications. Hence,

the "Mining" in "Minnesota Mining and Manufacturing Company."

There has been, incidentally, precious little mining connected with 3M since.

Today, 3M is 7 9,000 employees in 3 8 countries of the world,

with sales of 2-1/2 billion dollars resulting from successful marketing of some 50,000 or more major products.

Those products are sold through 30-some divisions, just to

keep things manageable.

Our continued growth stems from our fascination with offering

what people will want and need in the future, instead of what

they have wanted in the past, or even what they want today.

Look into any area of human need, and you'll find 3M—in

health care, transportation, safety, housing, education

and a host of other human concerns that we know as markets.

We have succeeded up to now by regarding serious problems as

business opportunities. That's also why most of us have so

much fun in our jobs. We enjoy real relevance . More than 4,500 of those 79,000 3Mers are scientists and

engineers. We bet heavily on the outcome. In effect, we

live in the future, because we must. Some 20 percent of

sales are derived from products introduced within the past

five years.

While we encourage innovation, we don't guarantee easy acceptance. The inventor of "Scotch" tape was told he had a wild

scheme, and was advised to put away that sticky mess and forget it. He was stubborn, and continued to work with his

brain child. Once he was recognized and successful, people

stopped calling him "stubborn" and described him as "persistent I "

I guess I'm still on some sort of probation, because last

week my boss called me stubborn. "Persistent?" I offered.

11
"No, stubborn. You're stubborn, Les," he said.

So I've plenty to shoot for. I'm still working for "persistent . "

Well, one last commercial for my company: Business Week

magazine has said 3M could be considered the nation's most

innovative enterprise.

That's high praise, and we love it. But we didn't pause to

bask in it. Our worldwide competitors are tough and smart

and aggressive. We always can feel their hot breath on our

necks as we keep sprinting to stay ahead.

Everything I have just outlined has a direct bearing upon the

future of Federal Supply Service under "industrial funding."

Because under "industrial funding," your customer's satisfaction will be a key element, just as it is for 3M.

The difference between 3M and "me too" industrial suppliers

is the 3M research organization. Those 4,500 men and women

work a powerful magic.

Innovation, the process by which an idea is translated into

the economy, is what benefits both customer and producer.

There are at least three steps in the innovative process

:

identification, generation and application.

Identification of a need can be thoroughly accurate, but if

research and development people don't understand what is

needed, or if the cooperation of engineering, manufacturing

and marketing people is less than ideal, innovation suffers.

Sometimes those closest to a problem are least equipped to

see effective alternatives. A study conducted by the U.S.

Department of Commerce indicates most major innovations are

generated outside the industry that is most affected by

those innovations. For example, nylon was developed by a

chemical company, not a textile company. For another, transistors were first marketed by an instrument company, not a

vacuum tube producer.

Sometimes it takes 7 to 15 years to travel from a good idea

to a successful product. We have found that lead time is

shrinking rapidly, compressed now to 3 to 8 years.

We have expertise in many technologies, so opportunity for

serendipitous discovery probably is higher in companies like

ours; but most successful research and development is

12
objective -oriented . By that I mean we encourage our people

to dream, but to a purpose 1 My friend, Al Reynolds, who now heads up a special department

offering alarm services to burglary-prone businesses, is a veteran of several commercial development ventures within 3M.

He, in his wisdom, developed what we call Reynolds' Formula.

It is: The Probability of Success increases rapidly as the

distance between the two points of view decreases. A technical man and a marketing man close together —organizationally

and geographically—can "live with" and develop their idea.

If they do their homework, and employ their own backgrounds

and logic, and have a strong sense of urgency about their

field work, they'll make that first sale. And learn from it.

So, we get our marketing and laboratory people as close together as we can, with each new development project. We

assign them the responsibility of calling together on customers, to find out firsthand what the customer really needs.

Often, the customer doesn't know what he needs--he knows only

that he has problems. It's like the delinquent kid being

interviewed by a social worker who begins by asking, "Now,

young man, just what seems to be your problem?"

If the kid knew, he wouldn't HAVE a problem.

Well, as we study customers' problems it the light of our

knowledge, we deduce how we can produce or improve a product

in such a way to give customers the value they are seeking.

Remember, they're not buying design. They are buying

performance . There's a world of difference. It's the difference between sale or no sale, winning or losing.

This, too, has everything to do with what I will recommend

later

.

I've had 20 years of experience in dealing with the automotive industry, including my first ten years with our

Abrasives Division. Way back, the auto manufacturers were

interested only in reducing cost. By force of their considerable purchasing power, they were able to roll back

prices

.

In the process, they drove out innovation. Creating those

conditions, you cannot hope to receive improved products

from the surviving suppliers, who cannot support research

and development on low profit margins.

13
Any large-quantity purchaser can be tempted to follow this

route. It makes no difference who the purchaser is —General

Motors, Western Electric or the United States Government.

Well, the automotive companies did wake up. They realized

they needed to change their purchasing policies to provide

incentive for improvements. Often the innovative supplier

is guaranteed a reasonable percent of the business —in some

instances, 75 percent the first year, dropping to 30 percent

in later years, to give him incentive to come up with something still better.

Of course, the "me too" companies can always duplicate any

innovation in a period of time and sell it at a lower price.

But, by definition, "me too" companies never get there

fustest with the mostest.

Sears is representative of the kind of buyer that is closest

to what the Federal Supply Service is considering. Sears

accepts products from suppliers ONLY after Sears tests have

confirmed the supplier's claims in meeting the performance

desired by Sears.

Further, the existence of Sears research laboratories helps

them identify their own needs with far greater clarity. They

improve their purchasing through their own testing facilities.

I am very pleased that Mike Timbers is promoting such testing

facilities for the government, simply because companies like

3M are delighted to deal with people who know what they want I

If you've ever sold shoes to women, you know what I m.eanl

Almost all industrial firms have procedures whereby they can

purchase small quantities of materials or new products at a higher price, and evaluation procedures to determine whether

it is a better value than previous purchases. With a new

item review schedule, GSA now can buy some prototypes also.

That's the essence of benefiting from innovation.

In the end, that procedure benefits everyone, including end

users in commercial markets. One good example that comes to

mind is 3M's Light Water firefighting agent. It was

developed by 3M and the Navy to deal with fires on aircraft

carriers

.

The Naval Research Laboratory has excellent testing facilities, and helped us develop that product rapidly. The cost

dropped dramatically, 66 percent in 8 years. Today the

commercial market for this product is even larger than the

14
federal military market. And all those lucky customers

owe a debt to the Navy, the people with urgent need and the

organizational ability to define the need and speed develop

ment of a new product.

This is a beautiful example of how the Federal Government,

with an urgent need to save lives and very expensive equipment, was able to stimulate commercial development.

Another example, though not an altogether happy one for 3M,

is the copying machine market. Large federal purchases

marked the beginning of our great success with "Thermo-Fax"

infrared copiers. Without government need for fast copying

we might still be waiting for the first dry copier.

Well, 3M was once first, but now we're second, to Xerox. Or

as we say. Brand X.

That's OK, they're out in front in one helluva competitive

market, and we admire tough competition. This race, of

course, has spurred innovation and price benefits for every

one, much to the benefit of government and business alike.

Well, after a windup this long, there's bound to be a pitch

and here it is:

I would like to make some recommendations.

First, I would like to suggest that GSA develop a procedure

for inviting both marketing people and R&D people from supplier firms. Believe me, this alliance results in more

effective communications. It's the application of Reynolds

Formula. It really increases the probability of success.

Second, I endorse the proposed GSA laboratory facilities,

which will enable technical people to talk to technical

people. Equally important, the lab could help eliminate

some of the existing specification procedures, particularly

unreasonable specifications.

Again, purchase performance, not design. If an existing

commercial product works, why not use it? If commercial

packaging will suffice, why demand special packaging? Form

should follow function, just as in folk art I

If you do indeed establish such a laboratory, make it the

best in the world. Stock it with the finest people and

equipment available. Trade expertise with one of the

world's finest labs —the National Bureau of Standards.

Don't follow anyone's example or you will, by definition,

be a follower. Lead. If the testing gadget doesn't exist,

build your own.

15
Dr. Jordan D. Lewis, Director of ETIP for the National Bureau

of Standards, has pointed out how GSA could stimulate innovation in the area of noise pollution control, simply by

specifying the decibel levels for lawnmowers.

There is precedent for this. Look at how the laboratories

of the U.S. Department of Agriculture have stimulated food

production, and helped increase farm productivity four-fold

in 30 years.

My third recommendation is that GSA consider limiting the

amount of competitive items it purchases from any one supplier. In industry, we have found that suppliers who sell

only to one customer are much less likely to provide product

innovations than those who sell a small percentage of their

output to a given customer, commercial or government.

You may wish to insist —as most large industrial concerns do

that there be at least two sources of supply, preferably

more

.

If the item is patented, GSA should purchase only from valid

licensees. As you would expect, the patent system is vital

to firms like 3M. Without its protection, we would soon lose

our incentive to innovate.

My final recommendation is this:

In purchasing new items, GSA personnel should have authority

to buy prototypes for testing and evaluation purposes, even

though the price will be higher to include initial R&D costs.

Most commercial firms, like 3M prefer to have R&D costs

covered in the purchase price , rather than through

government-funded contracts. This leaves product manufacturers free to market the product commercially, because it

avoids disclosure of proprietary information to possible

competitors

.

It leaves the innovator with a clean proprietary position

and avoids complicated specifications.

Certainly, any highly successful item will invite competition.

Look at the dry copying market. To fend off this competition,

an original supplier will find ways to reduce the price to

all markets or develop further innovations to justify the

product

.

This means GSA may be paying the most favored price of the

largest commerical purchaser, but will be receiving additional improvements while stimulating more from industry.

16
I appreciate deeply this opportunity to share my thoughts on

this subject with you, and look forward to discussing it

further with you during the symposium.

I want to compliment GSA and the National Bureau of Standards

for arranging this meeting. Your deliberations at this

meeting should result in more value to government users of

products, and utlimately, increased value to people everywhere .

I will finish my presentation with a quote that fits your

present situation exactly. I don't know the author, but he

must have walked before you on the same paths:

"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to

take the lead in the introduction of a new order of things;

because the innovator has for enemies all those who have

done well under the old conditions and lukewarm defenders

in those who may do well under the new."

Thanks very much.

PROCUREMENT EXPERIMENTS CONDUCTED BY ETIP

by

Ralph J. Barra

Chief, Procurement Programs

Experimental Technology Incentives Program

Good morning. These may be the last 2 0 minutes you have to

just sit and listen since the rest of the two days we are

going to try to get you to do most of the talking. This

morning I will give you a few of the objectives we have set

for the ETIP Procurement Program. Up to now most of the

ideas and directions of ETIP have come from the staff and

from our contacts with federal agencies such as GSA and the

Veterans Administration. What we hope to get out of this

conference are some new ideas... some new suggestions and...

some new directions for ETIP. We are really depending on

you. It's your opportunity —if you have some new ideas for

ETIP--to tell us them before you leave town.

ETIP is not interested in just the goods that the Federal

Government buys but we are interested in improvements in

goods that the private sector buys . The government only

buys about one percent of those goods. ETIP's interest lies

mainly in the other 9 9 percent of the market. The technological changes that we are looking for are changes that

17
are also compatible with national objectives such as energy

conservation, conservation of resources, health and safety,

and productivity. Those are the kinds of changes that ETIP

is interested in —improving the quality of life (a pretty

tough term to define) and the economic strength of the

nation. It's a large umbrella to be operating under.

Government procurement, in general, has encouraged the status

quo. It has used specifications that have a very low risk

factor. It has actually encouraged industry to design and

build last year's products and not something new. It has

not demanded change. That, basically, is the problem that

we are facing. However, while the government only buys

one percent of the goods, in many cases, it actually is one

of the largest single buyers. It has the potential to influence a company or an industry to change or introduce new

products. It can provide a mini-market and in some cases

that one percent industry figure may be a 20 or 30 percent

figure for a single company. So it may encourage a few of

those companies to change and in doing that it may break the

ice —may put a hole in the dam and start the flood that we

are looking for. We have another indicator of the government's potential and that is where the government has caused

some companies to set up separate production runs (just for

those unique characteristics specified by the government)

.

ETIP is not advocating this at all. But it's certainly an

indicator that there are situations where the government's

buy is significant enough to cause something to happen.

What ETIP wants to do is to use that influence in a better

way

.

We are looking at purchasing tools that the government hasn't

been using. We are looking at these tools in an experimental

way. Some of these tools have been used before in defense

or aerospace with some failures and some successes but what

we would like to do now is to experiment with these tools in

a whole new ball game. What's going to happen if we use

value change proposals; or value incentives; or if we use

life cycle costing; or if we oriented the specifications

toward performance rather than design; if we allowed manufacturers to figure out how to achieve the performance that

the government has spelled out rather than telling them how

to do it? We don't know. We hope, in the next two days,

that you might give us some feeling of the potential for

success of these tools and that you might identify some new

ones

.

Being a policy research type group, ETIP is going to be conducting dozens of experiments with dozens of different

products. We are going to be trying to gain varied experiences in the application of a particular procurement tool.

18
For example, if we use "life cycle costing" for buying air

conditioners and it fails to incentivize product change,

is that enough of a data base to tell us that life cycle

costing cannot be used when we want energy saving changes in

the design of any product? Or should we try life cycle

costing in buying refrigerators, ranges and other energy

consuming types of products? By trying it out in a variety

of instances ETIP can see how many failures and how many

successes we get and then draw our conclusions. That is

what we are really all about. In the next year or so,

several experimental buys by the government will be testing

the same tool on a variety of products and in a variety of

situations. Is one percent of the market enough to influence

a product improvement by the government or do we need 5 , 6

,

or 10 percent? Will a supplier sell a new or redesigned

product to the government becuase of the publicity and the

exposure that that product will get? These are the kinds

of questions that we are going to try to answer. Some of

you may have some ideas about them and we would certainly

like to hear them.

What do we have to know about the availability of the technology? If we want energy conservation, for example, or

safety, do we have to know that the technology is there to

be used? Maybe not. We are going to pick some products

where we do know there is technology. For example, in the

noise pollution area, we know that several companies have

been very involved in the application of noise abatement

technology. The question is... can we, in some way, influence

and accelerate the diffusion of that technology into other

product areas where it has not been introduced? Can we influence the creation of new technology? Can we, by identifying a need, get a company to invest in additional research

or pull out from their research laboratory ... a new concept...

a new approach, that they have been holding, just waiting

for the chance to use it? We don't know but we will try

to find that out. We will use some of these incentives on

products where there have not been technological improvements for years and see whether or not, all of a sudden,

we have changed the curve and have actually helped to accelerate the introduction of some improvements.

Is the nature and the structure of the private market an

important factor? Can we provide incentives in certain

marketplaces and not provide them in others? Is it necessary for the private sector to have the same need as the

government or is it possible for the government to identify

a need that the private sector will recognize later as a need that it has too and possibly have the government

actually leading the way and the private' sector buying

later in essentially the same manner. For example, the use

of life cycle costing in purchasing. Up to now, the public
has primarily been interested in just the initial price of

the goods that they buy. But with the changes we have ahead

of us... with the rising energy costs —when electric bills

double —will that be a factor? Will they start demanding

more efficient products for their kitchens and the home?

Maybe. If that's true, then the government, starting now,

may give industry the incentive to start changing products

now so that they can get a headstart on that emerging market.

Is it important whether it is a consumer market, an industrial market or commercial market? Will the incentives that

we test be more successful in one market than another? We

don't know and we are going to try to find out.

Does it matter what the structure of the supply sector is?

Will our incentives be successful when the supply sector is

a bunch of small companies with no large ones or will they

be successful in any supply sector structure? Will a company that has a large investment in a particular design

modify that assembly line slightly to satisfy the government need and then push that improved product into the

larger marketplace? We don't know.

Here are a few examples of some of the projects that are

underway. In the consumer hard goods area we have focused

on energy conservation. For years the government has been

using design specs with unique requirements and has actually

caused most of the industry to be non-responsive. The

government has ended up with products that they are really

not happy with—they may have had the lowest price but not

the best value . In cooperation with GSA, ETIP is re-writing

some of their specs in a "performance" language so that the

energy conserving characteristics of a product are spelled

out and targets are set for energy innovative approaches by

industry. This is just a starting point. If this proves

to be a good relationship with that particular industry

then it may lead to other characteristics being defined in

terms of performance. Safety is one... since the Consumer

Product Safety Commission has listed some of these products

as being hazardous.

In the medical area, ETIP is working with the Veterans

Administration and looking at purchasing tools that are

very similar to the types identified in GSA. . .performanceoriented specs and life cycle costing. As taxpayers we

are interested in improved productivity in hospitals and

as potential patients we are interested in improved safety.

The use of these tools may provide the environment for

the purchase of equipment and services in hospitals that

lead to improvements both in safety and productivity.

20
In addition to the independent procurement experiments that

we will be conducting, we will also have to take an overview

of what's happening in the total ETIP experience. What are

we learning from these experiments? What do we have to do

now so that five years from now, when ETIP disappears, the

"better ways" of purchasing continue? What do we have to do

to "institutionalize" the new practices? ETIP ' s products are

federal purchasing policy recommendations. Institutionalization of some of these recommended changes in policy may

require legislation; some may require White House directives.

How can we do it?

One approach that might work is being set up in GSA now;

that is, the establishment of an Office of Experimental

Procurement Policy. This office, in parallel with the

separate experiments that are going on, will be looking

very closely at what is happening ... looking at what the

industry response is... looking at how the marketplace

responds. Has there been any influence? Has anything

happened? Has ETIP accelerated improvements in products?

Has ETIP done things in such a way that industry says...

" don't stop - continue . " ETIP is working with agencies that

are receptive to this concept so that when ETIP disappears,

the ball is carried and the concept doesn't drop by the wayside. In a few years ETIP will be recommending policies and

we want those policies to be followed. The only way is to

have the people that will be affected by these changes already on the team and trying them out. If they have tried

the new procurement tools already, then if a presidential

directive is signed or if legislation is passed, the agency

will be responsive and will carry it out.

This is a brief overview of the ETIP Procurement Program and

in the next few days it will be up to you to help set new

directions which may help all of us get the most out of this

program.

CLOSING REMARKS

Michael J. Timbers

Commissioner

Federal Supply Service

The last couple of days I thought the toughest job I was

going to have was testifying before the Senate Appropriations Committee, but I find that I was wrong. The toughest

job I have had is trying to summarize the fantastic recommendations that have come out of this conference. Let me

try to focus on what I see as some of the themes evident

from the recommendations that I have just heard.

21
First, I think that the multiple awards system obviously is

here to stay. Some modifications were suggested, but it is

certainly a system that can help us to encourage product

innovation. Surely, it doesn't discourage new ideas to the

extent that some of our other methods might, at least in

the view of some of the participants. Second, it is obvious that we want greater communication, not only between

the procuring agencies and the contractors, but I think it

came through loud and clear that we need greater communication between the ultimate user of the product and the manufacturer of that product.

I think it is also clear that we need additional promotional

information to let more people know what we are trying to do.

We probably could have used more publicity before we got this

meeting underway. Certainly, we need to increase our followup and publicity about the things we are doing.

Fourth, where specifications are necessary, where they are

appropriate, performance specifications are more desirable

than design specifications.

Fifth, market research. Market research is necessary within

the federal supply system. I share that opinion, and we are

working in that direction. We are not moving as fast as I would like to see us go, but we are moving to develop more

of a capability to canvass our customer agencies and determine what it is they really need and what current products

they are finding unacceptable. Along with this is the concept of commodity groupings in our acquisition process

getting our procurement specification and our development

people closer together. We are working in this direction,

too

.

Now let me comment on a couple of other items that were of

particular interest. One idea that came out of the packaging

discussion was to put a performance specification for packaging in one of our appliance experiments sort of piggy-back

on the appliance experiment itself. I think it sounds like

a good idea.

Another interesting recommendation was that the procurement

officer should be encouraged to look for innovations. I

believe that came from a couple of groups. I happen to agreeand think that it is one of the things we should start

working on right away to see how we can encourage our contracting officers to be more innovative.

Another suggestion was for a better flow of information between state and local governments. I might mention that we

have already started this interplay, with ETIP's help and

22
with the help of Al Hall of the National Institute of Governmental Purchasing and Bob Cornett of the National Association

of State Purchasing Officials. We also have a Joint Federal,

State, and Local Advisory Panel on Procurement and Supply,

which I chair. In our quarterly meeting conducted just last

week, there was a great amount of discussion about how we can

get an interchange of information concerning what we are

doing and what the state and local governments are doing.

I support this concept wholeheartedly.

The matter of longer term agreements was brought up. This

also was one of the recommendations that came out of the

Commission on Government Procurement, and it is something we

are working on within the executive brand. I agree that we

should have the authority to do longer term contracting.

Another point that interested me was the idea of restructuring

the Federal Supply Service in the course of implementing ETIP

projects to come up with more of a central point of contact

for receiving new and improved product ideas. That I think

has a lot of merit and I will be spending more time on determining how we can make the Federal Supply Service easier to

deal with on such product ideas.

Jordan mentioned earlier that we are going to put out a final

report and indicated what he thought the time frame will be.

At lunch today we talked about which of the co-chairmen will

be the principal coordinators from here on so that both cochairmen don't have to get in the act. Let me quickly identify them:

LaFave in office machines, Bateman in furniture, Goff in containers. Gold in ADP peripheral equipment, Whitworth in instrumentation, Forbes in electrical equipment, Church in

automotive equipment, Kyhos in photographic equipment and

audiovisual, and Montgomery in chemicals. When we send you

the copy of recommendations that came out of your study

groups, we will also give you the addresses of the members

in case you want to consult with them before you submit your

final reports.

Also at lunch today we talked about the idea of a follow-on

meeting. I think the feeling was that a follow-on meeting

would be a good idea, and that a good time would be after

the first of the year. This would give everybody a chance

to digest the proposed recommendations and also give us the

opportunity to do some work on some of these excellent ideas

23
suggested. The comment sheets that you got will help us to

decide on the scheduling of the next meeting. Let me ask

this now for my own use: Is there a general feeling that a

followup on this in the future would be a good idea? O.K.

Very good.

Lastly, I want to thank all of you for attending. I appreciate the time and effort you put into the symposium and I

feel sure that this will be the start of a continuing

dialogue between government and the industry and educational

representatives attending the conference.

24
CONCLUSIONS

SUMMARY

Representatives of nine industry product areas and government specialists in the same fields participated in the

symposium. In addition to the plenary sessions, separate

workshops considered problems in each of the product areas

and reported to the full conference. Each workshop had as

co-chairmen a government and an industry representative.

The product areas were:

Office Machines (Typewriters, calculators, copiers, micro-

- fiche)

Furniture (Wood and metal office furniture)

Containeriz at ion/Packaging

ADP—Peripheral/Supplies

Instrumentation (Optical and electrical measuring devices)

Electrical Equipment (Appliances and power hand tools)

Automotive Products (After market replacement parts and

tires)

Photographic and Audio-Visual

Chemical (Coatings, cleaning agents and detergents)

General guidelines provided the workshops prescribed that

consideration be given to the barriers inherent in the

Federal procurement process that tend to inhibit introduction of improved technology in products sold to the government and to incentives that tend to encourage innovation.

Workshop participants were asked to consider the pros and

cons of different types of government specifications that

are disseminated to solicit bids, and to evaluate various

aspects of procurement practices.

Reports of the nine workshops, including recommendations,

are in the appendix.

ASSUMPTIONS

A basic assumption of the symposium was the tremendous influence of the Federal Government upon technological innovation on the part of industry because of huge governmental

expenditures for goods and services. In Fiscal Year 1972,

the Federal Government spent $57.5 billion on 16 million

individual purchases. Federally-assisted purchases and

procurements by state and local governments or private

25
organizations influenced by federal programs probably

accounted for similar totals.

In addition to the sheer volume of purchases, the Federal

Government has a considerable impact on technological

improvements through direct support of research and development, regulatory procedures, patent and anti-trust policies

and procurement practices.

It was further assumed that there are technological innovations that have not yet reached the marketplace whose introduction can be facilitated if a government market of sufficient size can be assured.

Government transactions, it was assumed, should be equitable

to both sides. The government is entitled to a useful,

efficient product and the contractor is entitled to a fair

price

.

A further assumption was that research is essential to

development of new and improved products and that the

success of this country in world markets is directly

related to its effort in research and development.

DISCUSSION . The government's aim in trying to find means to increase the

rate of technological innovation is to hasten changes that

are compatible with national objectives. These include

energy conservation, pollution control, safety of workers,

and improvement of the country's competitive position in

international trade. Another objective is to attempt to

lead the way toward acceptance of new and useful products

in the public marketplace.

All discussion in the symposium related in some manner to

the way the government buys goods and services , how it

defines the products it wants to buy, how it makes known

its needs to producers, barriers to smooth and efficient

contract arrangements and suggested means for overcoming

barriers. Recommendations were made for facilitating the

procurement process.

1 . Specifications

Government speakers explained that in the normal purchasing cycle the Federal Supply Service is requested

by customer agencies to purchase certain items , and it

develops purchase descriptions, or specifications, to

be used as a basis for competitive procurement of the

items. Industries selling to the government must

26
respond in a manner quite different from the way in

which they sell to the private sector. Commonly a company develops a product line in response to market

demands or attempts to create a market for its products.

In selling to the government it often must tailor its

products to specific requirements.

a . Function of Specifications

The function of specifications is to make known

the government's needs to potential suppliers.

Despite some limitations, they serve a useful

purpose. They are widely distributed among prospective suppliers, are used by local governments

and others who have access to the federal supply

system, and thus significantly broaden the base

of industry suppliers.

b . Types

Specifications are expressed in terms either of

design characteristics or performance characteristics or a combination of the two. Simply stated;

design specifications describe what the government

wants to buy and how it should be made; performance

specifications tell what the government wants and

how the product should perform, leaving the design

largely to the ingenuity of the producer. Performance specifications are generally favored by

industry because they allow more flexibility.

Procurement personnel must constantly strive to

strike a reasonable balance between opposing pressures from users who tend to favor definitive

specifications and suppliers who prefer flexibility.

If specifications are issued that are too restrictive, prospective suppliers find it difficult to

meet them; if they are too permissive the resulting

product may not satisfy the user agency.

c . Shortcomings of Specifications

Some sentiment was voiced that development of specifications takes too much time, and that in the

interim between receipt of a requirement and dissemination of a procurement specification technology

could advance sufficiently to produce significant

improvement in products. In such cases the specification is outdated by the time it is issued. A

number of participants felt that specifications

should not be used at all in the case of items that

are readily available commercially. Usually, it

was felt, such items could be procured on the open

27
market and negotiations for quantity and price under

taken as required.

It was generally agreed that specifications that

are too definitive tend to inhibit innovations

because they preclude the flexibility needed by

suppliers in order to be encouraged to improve

their products.

Suggested Modifications

Modified procedures which, it was believed, would

encourage innovation are use of variable specifications, acceptance of qualified bids, and more frequent use of the value incentive clause in contracts

These are defined below.

(1) Variable Specifications

A variable specification, as opposed to one

that defines requirements in complete detail,

would allow bidders some latitude in proposing

a variation to the defined product on the

basis that it would provide equal or superior

performance or be less costly in the long run

though possibly more expensive initially.

(2) Qualified Bids

A similar concept is that of a qualified bid.

This would enable a prospective supplier responding to a specification to offer an alternative, providing he could demonstrate that it

is of equal or superior quality and comparable

cost . .

( 3 ) Incentive Clause

A third device is the value incentive clause,

which would provide that after a contract is

awarded the producer could suggest a moneysaving innovation which, if agreed to, would

result in an amendment to the contract, with

savings shared by contractor and the government . Performance Specification Tests

Responses to performance specifications must be supported by testing to establish that the product will

perform as the requirements specify. Development of

satisfactory tests usually is expensive and may be

time-consuming. There may be occasions when the

urgency of the needs of customer agencies is such

that there is not time to prepare a performance

specification

.

28
Nevertheless it was urged that greater emphasis be

placed on awarding contracts on the basis of product

performance rather than design. It is the function

of the product that is significant, it was stressed,

rather than how it is made, and creativity is stifled

when suppliers are confined to furnishing their

products according to strict specifications as to

size, weight, and design. It was felt that procedures for developing performance specifications

would be improved by their more frequent use.

To insure uniformity of testing methods and equal

competence, it was suggested that personnel of government testing laboratories work closely with laboraties already established in industry. Many

industries have developed testing facilities, equipment and procedures that have involved large investments. Some participants thought that when credibility has been established in industry laboratories

their specifications for product performance should

be accepted rather than have the government duplicate the expensive process.

f . Multiple Award Technique

The multiple award system enables the government to

contract with a number of suppliers of a given

product. A strong consensus favored this system and

considered it useful in providing the government

with a wide selection of products and encouraging

innovation on the part of suppliers. It was suggested, however, that since new products often are

not offered nationally at the early stages of introduction, multiple award contracts should be offered

by regions. This would permit the contractor the

necessary sales and after-sales service on the new

product and the government would obtain a new product

before national service coverage is available.

Life Cycle Costing

The concept of life cycle costing was considered virtually

unanimously to be a process that should be employed more

frequently in government procurement. This concept shifts

the emphasis from the initial price of a product to the

total cost of ownership to the government. Numerous

examples were given to illustrate that if means can be

found to assess the total cost, including operating,

maintenance, and replacement costs, a higher initial cost

often may be justified, and indeed be more economical in

the long run.

29
a . Quality Product Economical

A simple example was cited in the use of paint. Different grades of paint are manufactured to satisfy

demands of a variable market. However, considering

the fact that most of the cost of a repainting job

is in the labor, it often is economical to use high

quality, and perhaps expensive, paint initially so

that repainting will not be needed for a longer

period. If government specifications permit cheaper

paint to be procured under competitive bidding practices the initial cost may be lower but the total

cost considerably higher.

3 . Government- Indus try Communications

The objectives of the conference addressed the need for

greater interchange between government and industry, and

the point was repeatedly made both in the general sessions

' and in the workshops that benefits will accrue to both

sides by frank and open communications.

An example of the value of close communications was cited

by a representative of a trade? association who reported

that as a result of a recent joint government-industry

effort a new type of price-adjustment clause was developed

for his industry which many of his associates believe

will generate more interest in bidding on future solicitations. This should result in a broader competitive base

and ultimately in improved products.

a . Technical Seminars

One method, it was noted, of promoting closer relations and broader exchange of information is to encourage greater participation in joint technical

seminars. Such events provide an excellent forum

for communication, despite some constraints imposed

by Fair Trade Practices laws and the need to protect

proprietary information.

b . New Item Introductory Schedule

The "New Item Introductory Schedule" program was cited

as a useful vehicle for government-industry dialogue

on technological advances. This procedure provides

for acceptance of unsolicited proposals for new

products or services and negotiation of contracts

when they can be justified as favorable to both sides.

Sentiment was evidenced that this program should be

expanded, and that a central contact point should be

established within the government for receiving new

product ideas or improvements.

30
c. Incentive Program

Concern was expressed that procurement personnel are

not given sufficient encouragement to keep abreast of

new technology in products for which they have responsibility. An incentive program might be developed,

it was proposed, to motivate procurement personnel

and encourage them to participate in seminars, activities of professional societies, and trade association

meetings. It was suggested also that commodityoriented groups in the procurement system be given

more direct responsibility for product improvement.

d. Information Dissemination

A strong feeling was manifest that the government

should re-examine its system of dissemination to

industry of information on products, procedures,

and regulations. Too often, it was said, such

information appears only in abbreviated form in

the news media, and it was suggested that greater

attention be paid to business journals and trade

publications

.

An example cited was the inadequate knowledge in some

industry sectors of the impact of various governmentsupported socio-economic programs through small business and labor set-asides and priority treatment for

prison industries and the handicapped. Large companies may be adversely affected when they invest

heavily in development of a new product, then, after

a year or so, are ruled out of competitive bidding.

It was urged that if firms developing new products

cannot be protected against small business set-asides,

at least until they can recapture their investment

costs, they should be made fully aware of the adverse

possibilities before incurring costs for research and

development.

e . Manufacturer-User Communications

It was emphasized that improvement in communications

is especially needed between manufacturers and users

of products. In order for a manufacturer to be in a position to assess new ideas or improvements he must

. be able to gauge the effectiveness of his product in

its ultimate use. Current procurement practices tend

to insulate the user from the supplier and opportunities for useful product improvements often are missed

because of the lack of feedback to the manufacturer.

It is particularly important, it was said, for the

manufacturer to be informed of failures or deficiencies in a product so that corrective action can be

taken and quality control improved.

31
Local Government CommuniGation'

It was noted that some state and local governments

have had difficulty in attracting innovative

products in their procurement activities, in part

because of the dispersion of purchasers and lack

of uniformity in specifications. A better flow

of information between the federal and local

governments could help alleviate this problem.

A joint federal, state and local panel on procurement already is addressing this problem, and

the National Institute of Governmental Purchasing

and the National Association of State Purchasing

Officials are making important contributions in

this area.

Market Research

Industry would profit considerably, it was stated,

from long-range consolidated forecasts of government requirements. A well-received suggestion was

that the Federal Supply Service establish a Market

Research group to identify user's needs, ascertain

how well users are being served by products, and

provide procurement forecasts that would include

types and quantities of products required and identify potential users.

Engineering and Marketing Personnel

A problem frequently encountered in the procurement

process arises because specifications for products

usually are devised with the aid of technical personnel in industry, and coordination with customer

agencies by procurement people is with engineers.

Responses to invitations to bid, on the other hand,

usually are from industry marketing personnel.

Although the specification may be sound from the

engineering standpoint, it may not be considered

profitable by the marketers. A closer relationship between engineers and marketing personnel,

both in industry and government, was urged.

Long-Term Relationships

The advantages of long-term relationships between

manufacturers and users were discussed by several

industry spokesmen. Research personnel in industry

often work closely with customers to achieve greater

performance efficiencies and facilitate long-range

production planning that often results in reduced

prices.

32
Present government regulations, which limit contract authority to one-year periods, inhibit the

long-term relationships that are conducive to

cooperation in improving products, performance,

and service life. There was general agreement

that efforts should be made to promote legislation that would permit longer-term contracts.

RECOMMENDATIONS

Recommendations of the working groups appear in the reports

in the appendix. The following recommendations appeared to

be favored by a consensus of symposium participants:

1. Eliminate if possible and at least minimize the

use of design specification in the procurement

of "standard commercial" items.

2. Avoid use of definitive specifications that allow

no flexibility for acceptance of innovations.

3. Use performance specifications whenever possible

in preference to design specifications in all procurement activities.

a. Establish a laboratory facility for the Federal Supply Service for use in testing and

the development of performance standards.

4. Change the words "lowest price" in all procurement

regulations to read "lowest cost," and add the

words "considering all factors such as acquisition

cost, operating expenses, productivity, support

services available and other factors bearing on

value.

5. Increase exchange of ideas between government and

industry by:

a. Holding more technical seminars and encouraging greater participation of both government

and industry personnel.

b. Establishing a control point in government

for receiving presentations of new and improved products.

c. Establishing an incentive program to motivate

procurement personnel to keep abreast of new

technology, and encouraging participation of

procurement personnel in the activities of

professional societies.

33
d. Establishing in the procurement process commodity-oriented groups with responsibility for

product improvement within their commodity

areas.

e. Disseminating procedural, program, and regulatory information in places and in a manner

to make it more accessible to industry.

f. Fostering closer working relationships between suppliers and users to insure adequate

feedback that would enhance manufacturers

quality control.

Establish closer relations among federal, state and

local governments to work toward improved procurement practices.

Establish a market research group within the

Federal Supply Service to identify user needs and

provide forecasts.

Include industry marketing as well as research and

development personnel in procurement and contracting discussions.

Increase the use of the multiple award schedule.

Allow multiple award contracts by region.

Seek legislation to permit multi-year contracts.

34
WORKSHOP REPORTS

GLOSSARY OF FEDERAL SUPPLY SERVICE TERMS

PARTICIPANTS/ATTENDEES

Report of Workshop on

ADP — Peripheral/Supplies

Co-chairmen Elliott Gold - Government

Norman Ream - Industry

Procurement Practices to Stimulate Suppliers

Current methods of procurement, which utilize requirements

type contracts, impose burdens on both supplier, and the

Government in several known commodity areas. These commodity areas are those which are characterized by a limited

(low) number of potential suppliers, high volume, and the

Government as the major market. Current practices have the

effect of further reducing the number of suppliers, taxing

supplier production capabilities, increasing the risk of

accepting inferior products and deterring new prospective

suppliers

.

Procurement procedures should be developed which will help

to alleviate these problems and have the effect of maintaining several sources of supply, stimulating new prospective

suppliers, reducing production burdens of suppliers, and

assuring the Government-end-user of new and improved products . Commodity Examples: Magnetic tape (instrumentation type)

Tab cards

Executive office furniture

Manual typewriters

RECOMMENDATION

Have ETIP study innovative procurement practices which will

allow participation by additional suppliers in commodity

areas where the number of suppliers is minimal, requirements

are high, and Government is the prime user.

Incentives for Software Innovations

The manner in which the Government and the private sector

normally acquire ADP systems is a combined procurement of

the hardware and software. Combined primarily because most

manufacturers do not identify as a separately priced item,

certain software products, including operatp.ng systems.

35
The recommendation is to separate all software products from

hardware prices. This separation will create a dual incentive for both the manufacturers and independent software

houses as follows:

1. It will give the hardware manufacturer the necessary incentive to continue to support, maintain, and improve

for the life of the system, software products and operating system, because he will now realize that he will

have competition for those items from the independent

software houses.

2. The independent software houses on the other hand will

have an open opportunity, if the above can be accomplished through the procurement process, to compete for

any operating system, as well as other software products, the requirements for which exist in the ADP community.

RECOMMENDATI ON

That ETIP study the feasibility of the separation of all

software from hardware and have it separately priced. This

recommendation should not be construed as implying mandatory

separate acquisitions but as providing a basis for such acquisitions as deemed appropriate.

Policy Impact of Government's Socio-Economic Program on ETIP

The Government currently supports various socio-economic

programs through its procurement process, such as:

1. Small business set-aside

2. Labor surplus set-aside

3. SBA's Section 8(a) Program (minority business contracting)

4. Federal Prison Industries (FBI)

5. Committee for the Blind and Other Severely Handicapped

(NIB)

Industries developing new technology must be made aware of

the possible adverse impact these socio-economic programs

may have on their firms becoming Government suppliers for

the new products they have developed.

36
Adverse impact may occur as follows

1. Large business develops a new product, but a year later

the Government set-asides the procurement for small business .

2. Large and small business cannot be suppliers on items

they have developed, if FBI or NIB develops capability to

manufacture the product. All competitive bidding may be

eliminated in these instances.

3. Labor surplus set-aside may also eliminate firms from

being suppliers to the Government.

Typical examples: Ball Point Pens

Felt Tip Markers

NIB is sole supplier to the Government.

RECOMMENDATION

ETIP should attempt to develop means to protect all firms

developing new products against the aforementioned adverse

possibilities for a specific period of time (at least until

the firms can recapture their investment costs) . All necessary exceptions to statutes authorizing the above socioeconomic programs should be obtained prior to asking firms

to develop new products.

If exceptions cannot be obtained, all firms must be made

aware of the adverse possibilities prior to the firm incurring research and development costs.

Incentive for Offering New Products

Current Government procurement practices in the ADP field

require that they provide for the offering of general purpose ADP equipment by industry. However, upon the receipt

of offers, those items that are not sold commercially in substantial quantities are segregated and the Government requires "Cost or Pricing Data," from the manufacturer. All

major companies have refused to supply such data and will

decline to offer these products rather than reveal company

confidential information.

To assure that the Government will have the ability to accept

all commercial-type general purpose products, and provide an

incentive to offer such new products, procurement rules

should remove this deterrent.

37
RECOMMENDATION

That ETIP determine the feasibility of removing deterrents,

and if necessary recommend a legislative revision to accomplish this end. Falling short of this goal a finite definition of "substantial quantities" should be created.

Development of ADP Compatibility Through Standards

Increased compatibility of ADP hardware is a requirement in

order to maximize the life of equipment, and minimize the

life cycle cost of equipment. Further, compatibility will

act as an incentive to smaller members of industry to fully

utilize their ingenuity in advanced development efforts with

some assurance that they will recoup their investment.

Compatibility in ADP is normally achieved through the adoption of national and/or international voluntary standards.

RECOMMENDATION

Emphasis should be placed on the development of such standards. Such voluntary standards should immediately be

adopted as Federal Information Processing Standards (FIPS)

.

ADP Product Innovation

Product innovation and improvement is not being fully encouraged, because of the absence of Government facilities

and mechanisms to accommodate unsolicited proposals. The

lack of encouragement has resulted in adverse impact on

the innovative incentive for all ADP suppliers to come forward with their innovation ideas.

RECOMMENDATION

To promote and encourage ADP product innovation the following should be instituted:

Policy, procedures, and operating facilities should be established to receive, evaluate, and where deemed appropriate; take further action regarding unsolicited proposals

for new and/or improved ADP products.

Further, recognition should be accommodated to those advancing such unsolicited innovative proposals.

38
Report of Workshop on

Automotive Products

(after market replacement parts and tires)

Co-chairmen Dennis Poll - Government

John R. Church - Industry

DISCUSSION #1

In the initial discussions of this group, it was determined

that some changes in existing GSA purchasing procedures would

further enhance the opportunities for industry to respond to

ETIP's objectives.

In the majority of case histories discussed by the committee,

it became evident that close adherence to some of the

existing GSA bid procedures precludes the opportunity for

suppliers and GSA personnel to establish a long-term relationship. Long-term associations are conducive to a better

climate, wherein government and industry could work together

to improve products, product service life and performance.

In private industry, manufacturer's R&D personnel work

closely with commercial fleets in the technological development of products; the objective being to supply the fleets'

needs for greater efficiencies in performance and life-cycle

costs. This type of cooperative effort can be attained only

under "long-term association" conditions. Further, the

manufacturer should have some assurance that, if their

products meet the requirements, they will be used for a reasonable length to time, and thereby justify at least a portion of development expense.

This system works very well and most manufacturers are not

hesitant to fund such programs, with the expectation of

obtaining a fair return on their investment. In a majority

of cases, manufacturers do not ask the fleet operations to

participate in the costs other than the use of the fleet's

vehicles, maintenance equipment and the keeping of essential

records by fleet personnel.

RECOMMENDATION #1

We, therefore, venture that the development of a GSA longterm government-industry agreement would produce the following benefits for the government:

39
a. Encourage industry to invest, and cooperate,

in long-range product development programs

.

b. Improve product quality and perform.ance

.

c. Facilitate long-range production planning.

d. Assist in automatically upgrading standards

and specifications.

e. Simplify servicing.

f. Further facilitate communciations between

government agencies and suppliers.

DISCUSSION #2

The automotive Products Committee discussed the feasibility

of placing more emphasis on awarding contracts based upon

specified product performance. Creativity is often stifled

and improved technology discouraged when suppliers are confined to furnish their product according to tight specifications as to weight, size, design, etc. when the function of

the product is actually the priority rather than the design.

RECOMMENDATION #2

Establish method for evaluating products and awarding contracts based on specified performance requirements. These

methods should also be established with a provision for

acquiring products having performance values which exceed

the requirement but which render an overall cost savings

based on the "life-cycle" concept.

DISCUSSION #3

Members of the committee were concerned that, in many cases,

government purchasing personnel are discouraged from informing management of their desire to purchase new and

improved products because of the extra "paper work" involved.

One example: Somewhere in the purchasing system, procurement

personnel could still be purchasing cotton-cord tires for an

application or usage where new synthetic fibers would render

better performance and life, solely because of not wishing

to be troubled with all the procedures necessary to obtain a change in the specifications.

Another example: Improper maintenance of batteries is the

major cause of failures. Yet, if a maintenance free battery

40
became available at a higher initial cost, it is unlikely,

under existing procedures, that it could be purchased without a considerable amount of effort.

Packaging is another area which has considerable potential

for cost savings by the government. Industry is often

forced to make deviations from their regular packaging to

meet the government specifications, yet within their industry they have developed new and improved packaging which,

in many cases, exceeds the government specifications. In

other situations, specifications written years ago are no

longer valid and industry again must deviate to meet the

government specifications and, in doing so, must pass these

costs on to the government or suffer a profit loss on the

packaged product.

RECOMMENDATION #3

Initiate an incentive program to motivate government procurement personnel to recognize and keep abreast of new technology on the products for which they have procurement

responsibilities. Further, to extend the efforts necessary

in the procurement procedure to take advantage of these

products, where and when they meet the requirements and

are advantageous to the government.

DISCUSSION #4

Although the suggestions of this committee are basically

related to finding ways the government can accomplish step

#1 in their objectives by taking better advantage of the

technologies which already exist, we would like to reiterate

our beliefs that industry has been discouraged from offering

the government improved products because the bid system

limits procurement personnel from considering a more costly

product, regardless of the potential for better performance

and life cycle cost savings.

RECOMMENDATION #4

Develop a system which makes it easier for government to

have new or improved products evaluated and accepted by the

government

.

DISCUSSION #5

Modern industry has regrouped and realigned management to

produce specialist in the development of purchasing and

marketing of related products. Industry personnel assigned

41
such responsibilities become experts in these related

products and have management responsibilities. Our group

feels that these efficiencies and new methods of management

could be well applied in the procurement areas of the government . As an example, a government purchasing specialist assigned to

hand tools and related items, would become an expert in that

field if given the responsibilities listed in our suggestion.

A top priority in his management responsibility would be to

research and market for innovations in that particular field

and encourage industry to further innovate to satisfy the

needs of the government usage or application.

RECOMMENDATION #5

Conduct an experiment to accommodate a product group manager

who would have the total responsibility for management of a

line of related products. This responsibility would encompass the following:

a

.

Marketing research.

b. Product development and specifications.

c

.

Purchasing.

d. Quality assurance.

e

.

Marketing

.

f

.

Distribution

.

g- Inventory control.

h. Customer service.

DISCUSSION #6

In the automobile and vehicle fields, industry has developed

sophisticated testing equipment and procedures requiring

large investments. From these facilities they have developed

their own specifications which their products must meet. When

companies have established creditability in their laboratories, it seems logical that the government could accept

these specifications for product performance without the

necessity of duplicating all of the expensive equipment and

procedures

.

42
RECOMMENDATION #6

Increase acceptance of industry test results from qualified

laboratories for product life and performance.

DISCUSSION #7 ,j This committee endorses the expansion of government test

laboratories, where feasible, and feels that the personnel

with test laboratory responsibilities should work closely

with industry. They can then determine which product testing

can be accepted and the necessary equipment the government

should have. They can also determine which procedures should

be developed for further testing to satisfy the government's

needs. Testing could then be initiated on GSA vehicles.

RECOMMENDATION #7

Expand and improve government test laboratories to perform

product testing as required and to develop specifications for

subsequent procurement.

Further, establish an automotive product testing group, within FSS, which would test and evaluate products on selected

GSA vehicles in cooperation with industry to determine

product performance and cost effectiveness.

43
Report of Workshop on

Chemical

(coatings, cleaning agents, and detergents)

Co-chairmen John M. Montgomery - Industry

David B. Smith - Government

The Chemicals Workshop was composed of four industry representatives, three government representatives, and one interested observer. The expertise included paints, coating

systems, floor finishes, waxes and cleaning agents.

A. The following factors were identified as impeding government and industry from achieving the ETIP objectives:

1. Lack of knowledge of procedures and convenient channels inhibits suggestions from industry.

2. Government resistance to change.

3. Industry concern over the limited availability and

utilization of testing (laboratory and field) and

evaluation by GSA.

4. Industry and Government's difficulty in identifying

and justifying the need for change.

5. Total time and expense to accomplish change in

specification and/or to market a new or improved

product.

6. Government's lack of application of LCC to justify

increased initial cost.

7. Industry's concern over lack of promotion of new

and improved products by GSA to federal agencies.

8. Requirement for special packaging for many bids,

where available commercially-accepted packaging

is deemed to be quite satisfactory, can inhibit

manufacturers from bidding.

B. The following factors were identified as desirable or

necessary to stimulate achievement of ETIP objectives:

1. Demonstration of total commitment of top management of FSS to support the new policy.

44
2. Dissemination of FSS desire to obtain new and improved products.

3. Establishment of a central contact point and proced

ures by FSS for receiving new ideas.

4. Ability to have prototypes purchased, tested, and

evaluated by GSA.

5. Adaptation of Life Cycle Costing; Value Incentive

Clause; and "guaranteed percent of business" concept.

6. Cooperative government-industry development and

implementation of performance specifications.

7. Feedback to industry on product acceptance.

8. Reduction of time and expense to accomplish change.

9. Wherever possible and practical, FSS should permit

commercially-acceptable packaging that has been

proven satisfactory in normal distribution channels

C . Recommendations for action : Action I

Structure FSS and involved government activities to implement ETIP concept to include: i

a. Establishment of central contact point for presenting

new and improved products

.

b. Establishment of a first class laboratory facility for

FSS use.

c. Establish procedures for field testing.

d. Funding for additional personnel and facilities.

Action II

Communicate the ETIP concept and procedures to government

and industry by:

a. Developing a modus operandi for all government agencies

with specification and procurement activities.

b. Notifying trade associations and technical societies.

45
c. Publicity through trade journals,

d. Special announcements to selected company presidents.

Action III

Accelerate development of performance specifications through

increased cooperation with industry.

a. Establish government industry working committees to:

1. Establish priorities.

2. Assist in the development of performance standards

and testing methods.

3. Obtain sufficient industry acceptance.

b. Prepare interim specification and use for procurement

pending full coordination.

c. Obtain full coordination.

Action IV

Establish procedure for surveying Agency users regarding

product acceptance of new or improved products developed

under ETIP concept, and — publish technical papers reporting the performance of the new and improved products.

D. General comment : The likelihood that new and improved products purchased by

the government will be sold in non-federal markets also was

discussed.

It was concluded that government purchase should have

immediate impact on the commercial market, but to a much

lesser extent on the consumer market because of current

advertising policies.

46
Report of Workshop on

Container ization/Packaging

Co-chairmen Frank Rubinate - Government

James Goff - Industry

1. What are some of the major impediments that inhibit the

government and industry from pursuing new and improved

products? What are the attributes of these impediments?

a. Additional packaging personnel and facilities are

required to communicate adequately with industry.

b. Definitive specs permit no flexibility to allow

acceptance of packaging innovations.

c. The present system is based upon selecting packaging

systems which are in use by a sufficient number of

suppliers to provide broad procurement base.

2. What are some of the major incentives that might be used

by the government and industry to pursue new and improved

products? What are the attributes of these incentives?

a. Guaranteed procurement to get new technology.

b. Sharing the benefits of improved technology in the

form of additional profits to the contractor.

3. How can the government routinely and systematically

obtain suggestions from suppliers regarding new or improved products that meet valid government needs?

Government people should participate in the activities

of packaging associations, etc. (At the present time the

government should be participating in the NSIA.)

4. How can the government most effectively use performance

specifications, life cycle costing, value change proposals, and other procurement incentives to stimulate

desirable changes in products purchased by the government?

The government can most effectively use procurement incentives in packaging by piggybacking packaging innovations

on other procurements (e.g., a revised qr opened up version of packaging specification PPP-P-600 for appliances

in connection with an experimental procurement of appliances) . 47
when is each of the foregoing procurement incentives the^

most preferred means for stimulating desirable product

changes? The least?

The use of performance specs (in most cases) will be

the most effective in stimulating technological change.

How can the government increase the likelihood that new

and improved products it purchases will be sold in nonfederal markets?

This question does not apply to Workshop 3.

SUGGESTED PROJECTS FOR ETIP

Palletization

Mailing envelope for documents.

Piggyback a performance requirement on another ETIP procurement .

a. A revised or opened up version of packaging specification PPP-P-600 for appliances in connection with

an experimental procurement of appliances.

Establish performance requirements for fibreboard.

48
Report of Workshop on

Electrical Equipment

Co-chairmen Joseph G. Forbes - Government

Bob Weiler - Industry

This report will cover the major points which this workshop believed to be important to the objectives of the

symposium.

The group began by examining current procurement laws , regulations, policies, methods, practices, and techniques to

identify factors in the procurement process which may impede, actually discourage or fail to encourage desirable

technological change. A number of barriers were identified

and much time was spent trying to understand and find ways

to minimize or eliminate those stumbling blocks. Many of

these barriers are interwoven within the total procurement

process and will be difficult to eliminate without making

major revision in current procurement policies and procedures. Also, a major reeducation of a large number of people

involved in the procurement process would be necessary.

In the area of Regulations , the following barriers were

identified. In some cases remedial action is recommended.

(a) Federal Laws — May be somewhat outdated — Recommend

they be reexamined and changed to minimize present barriers to technological

innovation

.

(b) Procurement Regulations — Industry often has difficulty

understanding how they are used and

applied. They often seem to be inflexible, complex, and incompatible. Two

sets of regulations, FPR and ASPR, cause

confusion. It is recommended that they

be consolidated.

(c) Environmental Regulations and Product Safety Standards

-- These are relatively new and changed

frequently without warning. Often industry finds it difficult to meet the

target dates set for implementing the

changes. (No specific recommendation)

49
(d) Ordinances and Codes — These vary from one locality to

another and can cause delays in implementing technological changes in products. (No specific recommendation)

(e) Buy American Act -- It inhibits foreign competition and

may somewhat discourage the introduction

of new technology from foreign sources.

(No specific recommendation)

In the area of Specifications / the following barriers were

identified. In some cases, remedial action is recommended.

(a) Design Specification — They are usually too restrictive, often reflect old technology, and

inhibit innovation. Often new technology is sacrificed as a compromise to

achieve competitive fairness. It is

recommended that this form of specification be used only when the performance

type spec is not suitable.

(b) Performance Specification — They are costly and difficult to prepare and use in the bid evaluation and contract enforcement. The

size of the market also has an influence

on the success of this type of specification. However, it is recommended that

this form of specification be used whenever possible, these problems notwithstanding .

(c) Qualified Products List — They freeze design, require

volume orders, and can be costly to get

products qualified. The group endorsed

the use of the QPL Technique when really

needed

.

(d) Bid Samples — They do not always reflect the same

quality as production models. Samples

are costly to both parties. The number

required sometimes makes it difficult to

meet bid submittal deadline. It is reccommended that "bid sample clause" be

used only when absolutely necessary.

50
(e) Preproduction Inspection — This is costly to supply and

increases the required lead time. It is

often difficult to certify inspection

and prepare test manuals. Some firms

like it -- others do not.

(f) Feedback — Feedback from the users is normally too slow

to provide for timely modification of

specifications to include new technology

for follow-on procurement. (Group felt

this was a serious "inhouse" Government

problem.)

In the area of Procurement Methods , the following barriers

were identified. In some cases, remedial action is recommended .

(a) Fixed Quantities — This method, as it is now practiced,

lacks a long-range, consolidated forecast which would permit potential bidders to do advanced planning. Industry

indicated a strong preference for the

"Fixed Quantity — Definite Delivery"

type of contracts.

(b) Indefinite Quantities — This method presents problems

with production schedules and the element of inflation adds to industry's

risk — and these factors tend to restrict competition, (i.e., the number

of bidders)

.

(c) Multiple Award Schedules — This method is acceptable.

The only adverse comment had to do with

small quantity orders.

(d) Two-step — This method is acceptable. However, it was

noted that it is costly to submit a

proposal, and there is also concern

over the danger of disclosure of industrial proprietary data. It is also

difficult to establish evaluation

criteria

.

(e) Decentralized — This method lacks the "big picture"

and does not provide good feedback

mechanism for information that may be

51
beneficial to other locations. Usually

this provides better communication between supplier and ultimate user rather

than the centralized system.

(f) Centralized — One small but negative field experience

or negative voice from one location in

the procurement cycle could mean the

loss of total Government account. It

is more difficult to communicate — up

and down — in and out — under the

centralized system. It extends the

administrative lead time.

After the group identified the "barrier" features to technological innovation in the current Government procurement

process, they were then reexamined to explore additional

ways to overcome or minimize those barriers. After the

examination of these barriers, the following conclusion was

made

:

Find ways to modify procurement techniques to allow

the Government to catch up with the mainstream of industry's production lines which employ industry's

latest technological innovations. The one specific

"Catch-up" action recommended is:

"To utilize the multiple award schedule, to

broaden the procurement base, using performance

specifications in order to buy the best current

product technology available.

This recommendation would improve the Government's

opportunities to take advantage of industry's current

planning, production, marketing, distribution, and

service systems. It would make available to the

Government those commercial products which have broad

customer appeal and acceptance. Some evidence that

some Government procurement actions do not attract

the major suppliers of the commercial market indicates

that current contracting methods need review and updating of the procurement processes.

Those actions which this group recommended to stimulate

technological innovations are:

1. Use modified procurement methods to supply technology

innovations; with guaranteed minimum, or definite

quantity with Life Cycle Costing and Value Incentive

Clauses. Where design requirements are used for

52
procurement, the Value Incentive Clause should be used.

Explore use of "design to cost" concept in procurement

of commercial items.

2. Provide long-range (up to five years) consolidated

forecast of Government's requirements. Make this

forecast widely available to industry, and with regular

update. This will be a valuable tool for industry's

use for advanced planning.

3. The group recommended the expansion of ETIP pilot projects to include other household appliances and power

tools. The objective of pilot projects would be to

achieve, among other things: (a) energy conservation;

(b) pollution abatement, including noise; (c) increased

product safety; (d) consideration for special human

factors

.

4. Provide for increased Government procurement personnel

participation in various industry groups, trade associations and professional technical societies in order

to exchange ideas and to obtain the latest information

for development of performance specifications.

5. Encourage broader use of the New Item Introductory

Schedule to introduce new items to the Federal Supply

Service. Provide means for "selected" feedback of

user experience to ETIP.

6. Utilize, to whatever extent necessary, in-house GSA,

other Government, and contractor facilities and personnel to increase the capability to implement the

above recommendations.

7. " Buy Performance , Not Products "

(Minority report not fully discussed in Workshop)

In the context of the "Electrical Equipment" Workshop,

this recommendation relates specifically to household

appliances (though it can be extended to other commodities) . Appliances are purchased by GSA and are

placed in dwellings occupied by Defense Base personnel

and families. The recommendation is that instead of

purchasing these products, GSA experiment with purchasing performance of the function which these products presently serve. This may stimulate the emergence

of new business enterprises which, like AT&T, would

contract to sell performance of delivery BTU ' s of

heating/cooling, or of washing/drying clothes, etc..

53
just as AT&T contracts to sell performance of the voicecommunication function. This "mode" of business, (i.e.,

selling performance versus discrete products) inherently

provides incentives to that business for making profits

that are in line with national objectives. For instance, such a "functional performance" business must

strive to use advanced technology in order to render

its delivery of performance, (e.g., heating/cooling,

etc.) with (a) minimum energy consumption, (b) maximum

useful life of hardware, (c) minimum maintenance problems, etc., because all these items are "costs" to the

supplier of "performance" and thus affect his profits.

Even if the proposed "rate" charged for providing performance passes on these "costs" to the consumer, competition between alternate suppliers of performance, will

provide incentives to lower costs to gain larger share

of the market, or make more profit, etc. Lowering of

these "costs" will require use of advanced technology.

Therefore, selling/buying performance instead of

products can be a powerful incentive for technological

innovation as demonstrated by AT&T, IBM, and Xerox.

Home appliances are a fertile field in which to experiment with this concept, because considerable technological advances are potentially feasible but hard to

sell in a product ownership route, and also because

these products tend to stay put in the dwelling where

they are first placed. Family mobility, particularly

military base personnel, thus places little premium on

ownership. An ETIP/DOD experiment would be means for

buying useful information since it is unlikely that any

other single large enough group of appliance users

(owners) could be found to test the viability of this

concept

.

Additional General Comments

:

1. These comments are observations of the Co-Chairmen and

are not made as criticisms but only to assist in

planning future conferences.

2. The Electrical Equipment Workshop would probably have

been more productive if more blackboard space had been

available or if some other means such as an easel for

flip charts had been provided so we could have kept a visual record of items discussed and decisions made in

view, convenient for reference at all times.

3. It was an unfortunate fact, but the Government/Industry

mix of the group was not very well balanced -- too

heavily weighted towards Government.

54
4. Some members of the group felt that they could have

been much better prepared for the conference if some

of the handout material had been made available to

them a few days in advance of the conference, (i.e.,

data on yearly procurements)

.

55
Report of Workshop on

Furniture

(wood and metal office types)

Co-chairmen Edward Bateman - Government

Richard Gordon - Industry

Background

General Objectives — The general objectives of the conference are to open government-industry dialogue on ways to

encourage (technological) innovation in the development of

products purchased by the Federal Government; to explore

methods of developing a "spin-off" effect so that the consumer marketplace might benefit from such innovations; to

set up procedures for analyzing the effect on the consumer

marketplace and to establish procedures for continuing a

government-industry dialogue.

Recommendations

We found that the objectives set for the ETIP program by

GSA/NBS are realistic, obtainable, and desirable. These

objectives should be vigorously pursued at the highest

levels in the Federal Supply Service with an increased allocation of manpower and other resources.

The furniture group strongly supports the recommendations

set forth by Dr. Lester C. Krogh, Vice President, Commercial Chemicals Division, 3-M Company, in his keynote address

opening the Symposium: — That GSA develop a procedure for inviting both marketing people and R&D people from supplier firms.

-- Acquire and staff (or have access to) a laboratory

facility, which will enable technical people to talk

to technical people. — Use purchase performance, not design; increase use

of commercial products and packaging.

The furniture group recommends that the current policy and

procedures used by the Federal Supply Service in acquiring

furniture and furnishings be changed drastically. An

immediate and abrupt change must be made in the acquisition

of furniture and furnishings by formal advertising (with the

56
related use of design specifications) . This method of procurement necessarily perpetrates the status quo, therefore

inhibits innovation. As a result, new and improved products

of the industry are not available to the Government user on

a timely basis.

We recommend that Federal Supply, in developing a new method

of procurement for furniture and furnishings, evaluate and

test the following as possible perimeters of the new method: — Develop a policy and procedure to pre-qualify suppliers and their products. — Establish a GSA furniture industry group for establishing minimum standards for product acceptance.

-- Utilize performance specifications.

-- Conduct extensive testing to insure quality level

product

.

— Take immediate steps to implement Dr. Krogh ' s recommendations on the industry dialogue.

-- Allow flexibility of construction to achieve a given

design/appearance (when standardized design is

important)

.

— Use a modified method of two-step procurement — use of technical proposals to establish qualified

products/suppliers list — make more than one contract awarded in second step

(resulting in some form of multiple awards)

.

— Expand use of two-step as it exists now (i.e., large

scale new projects)

.

— Develop some type of incentive system whereby a

supplier receives compensation for contribution of

technological or design innovations to the supply

system. This could be achieved in the form of a

design credit on the first procurement, actual payment for prototypes, and/or payment for technological

changes during performance of a contract.

-- Upgrading the training qualifications, etc., of procurement personnel (provide incentives to encourage

professionalism in the procurement area)

.

57
Minimize the numbers and types of standard items

available to most Government customers; perrnit

special procurement to meet special needs.

Adopt Life Cycle Costing to the extent possible, including secondary considerations beyond the product

itself.

Encourage unsolicited proposals for new and improved

items, and providing means for evaluating such

proposals.

Revise the multiple award concept, developing performance standards which exclude marginally acceptable products.

Use value incentive clause (s).

58
Report of Workshop on

Instrumentation

(optical and electrical measuring devices)

Co-chairmen Donald Whitworth - Government

Jack Beckett - Industry

The Co-chairmen of the Instrumentation Workshop of the Procurement Symposium consider they were exceptionally fortunate

in having the proper mix of Federal Government and nongovernment participants. Additionally, the participation of

each of the participants was active and fruitful. A considerable amount of discussion covering a number of hours in

session, led us to a consensus on a number of specific points.

These dealt both with barriers' in the procurement process and

ways item innovation could be encouraged and enhanced. These

points have been condensed and follow. Each, in itself, perhaps could be the subject of intense study. A few may appear

to be unobtainable. A few others impossible without enabling

legislation. Nevertheless, the workshop, as a whole, took its

assignment seriously. We considered that we had no restrictions placed upon us in arriving at the following specific

suggestions and recommendations.

1. Major impediment to development of new products and

product improvements is the overriding emphasis on lowest

price. Today's procurement practices inhibit improvements which enhance characteristics affecting use of the

equipment, its operation, maintenance, reliability.

2. The consensus was that the government's penchant for worshiping at the altar of "lowest price" definitely stifles

innovation. Life cycle costing was mentioned as a move

to break away from the "lowest price" tradition. The

group felt this was the right direction but would have

limited application. Doubt was expressed whether commercial type over-the-counter items would lend themselves to

this approach. Although government must find other ways

to get somewhat away from "low price," the Contracting

Officer must always document reasons why - and these reasons must be convincing.

3. To emphasize product innovation and to break from the

tradition of lowest price, a Reverse Two Step procurement

system could be considered.

59
First: Establish dollar amount (budget allocation) which is

fixed and applies to all offerers. Reasonable price

for what is desired or, establish funds available.

Define desired performance (not limited to fixed

quantity). Outline objectives and anticipated result.

Second: Evaluate proposals for most innovative offer with consideration of all cost factors of ownership and usefulness and future needs.

Award to the offeror who comes closest or exceeds

meeting established objectives for set price

4. Negotiation is a procurement process that if used more

extensively would permit constructive dialogue between

government and industry. By this is not meant sole source

negotiation, although in some instances of item development this mode is desirable. Legislation to enable

broadening of negotiation authority should provide recognition of competitiveness of negotiation procedures

(probably only hope to successful legislative change)

.

5. There is much to recommend the greater use of negotiated

(multi-source) procurement in lieu of formal advertising.

Interplay between industry and government is enhanced

allowing for fairer exchange of ideas and resultant innovation. Caution was expressed. Negotiation cannot be

used to set up an auction atmosphere —play one vendor

against another. Negotiation is particularly recommended

for instrumentation. The use of multi-awards based on

benchmarks was mentioned as an example of negotiation

that did not promote technical innovation.

6. The idea and expanded use of the New Item Application

Schedule technique is worthy of careful consideration in

government procurements

.

7. Design specifications inhibit advancement in technology.

Performance specifications are preferred. Product evaluation techniques are conducive to product improvement. The

innovator likes to have his product evaluated by qualified examiners. Bid sample requirements inhibit the

copier but not the innovator .

8. "Brand name or equal" has been, and continues to be , a difficult procurement method. Equivalency cannot be

proved, resulting in endless arguments. Multiple award

supply schedules are generally accepted as the best known

method for purchase of similar but not identical proprietary items.

60
9. The Life Cycle Costing clause approach is interesting and

worthy of pursuing but its definition must be consistent

with industry practices for the item involved as well as

clear and reasonable. The method is probably not acceptable for low dollar volume and most small expendable and

low-rate-of-use items.

10. Value change provisions have limited application. It has

no place in established catalog products of fixed price

contracts where the strongest possible incentive to the

supplier is to increase his profit. Simplifying the

product is part of product improvement but is an evolutionary process ever present with the responsible supplier.

11. There is a need to identify and promote commonality of

items so that government can contribute to a larger overall market.

12. Inability of government specifications writers to keep up

with the state of the art acts as a deterrent to industrial innovation because industry must lower its standards

to meet inadequate government design or performance

requirements. Performance specifications could do much

to remedy the situation because they set up a target for

industry to shoot at while design specifications do not.

13. User input is essential to the improvement of items and

introduction of new ideas. Government procurement practice insulates the user from the supplier. Useful product

improvements are often missed because user feedback is

prevented by the procurement officers. To avoid loss of

useful product improvements, more direct and meaningful

approaches must be developed to assure user feedback.

14. After warranty period, a "failure feedback" system to the

manufacturer is important for quality control and to enable better innovation and item improvement. Industry

quality control could be greatly enhanced in the major

equipment areas through such a feedback system.

15. Demonstrated performance is a strong incentive technique

for a supplier to improve his commercial type product.

For example by:

(1) Bid sample - not used enough.

(2) Panel review (limited usefulness except for large

procurements —there being an inherent difficulty of

assembling a qualified panel)

.

61
16. There are government "Rules of the Game." A barrier is

raised here because government may implement basic rules

differently, thus making it difficult for suppliers to

understand them. Procurement Officers should be encouraged to be innovative in procurement techniques. They

should ensure that all parties are well informed in a

timely fashion on the objectives.

17. We need greater free flow of information from the Federal

Establishment to state and local governments as well as

a reverse interchange. Much depends on receptivity, but

procurement incentives from local governments are as

important as federal procurement incentives. The

National Association of State Purchasing Officials and

National Institute of Governmental Purchasing should be

listed in the total ETIP effort from a dissemination

point of view. Work groups in similar disciplines

attacking similar problems would enhance this objective.

18. Providing a free flow of information from the Federal

Government to others will permit the not so sophisticated

non-Federal supplier to contribute his bit to technological innovations.

19. Government and industry should move closer together in

procurement areas to find ways and means to improve

productivity and encourage innovation. The government

should establish commodity oriented groups with product

improvement responsibilities to continually probe for

suggestions in item development particularly as related

to health and safety.

20. The practice of annual federal budgeting depresses innovation. If multi-year budgets were legislated, long

term commitments could be made and technological advances

(which often run farther than the budget span of one

year) are made more practical.

21. The government should promote a freer exchange of technical knowledge with foreign countries, especially in the

areas of conservation of materials and energy, and encourage a reverse exchange because foreign technology in

some fields is far ahead of our technology.

22. Defense contractors are barred from contributing to technology transfers because of prescribed cost accounting

limitations on independent research and development.

62
23. Commercial suppliers are barred from defense contracting

because of incompatibility of accounting standards and

DoD limitations on independent research and development.

24. While all did not agree, the point was made that government regulations and resultant paper work put the small

business man at a disadvantage, discouraging him from

wanting to do business with the government, thus drying

up innovations that could conceivably come from that

source

.

25. The Commerce Business Daily is considered by industry and

government representatives alike as a potentially potent

force in bringing industry and government closer together

in the promotion of mutually beneficial procurements and

consequently enhancing the probabilities of innovation.

But the CBD is far from perfect. It should be:

(1) More Carefully Classified

(2) Better Proofed

(3) Deliveries could be more timely

(4) Cross Indexed

(5) Mailed in a Distinctive Envelope (e.g., diagonal

colored stripe)

The feeling ran strong that a constructive overhaul of the

vital link between the selling public and the purchasing

government is useful now.

26. New government legislation. Executive Orders, etc. (example -- The Clean Air Act) should be explained fully and

in a manner that will reach the producer.

The government should take a more direct and affirmative

approach in disseminating product, program, procedural,

or regulatory information in an easily accessible form

with which industry is familiar - for example, trade journals or the Wall Street Journal - rather than let such

information be disseminated as a shortened or sometimes

distorted version by the news media.

Make a conscious effort to get the information in a place

and manner that the producer is most apt to see it early

enough to be of value.

27. One respresentative from industry particularly wanted to

make the point that the government should have a "desirement" data bank which would permit no'-cost entry by all

businesses and government activities to determine government desirements . The rationale for this unique and

63
noteworthy suggestion is that engineering and procurement

personnel would have the ability to express their positions without a formal announcement being involved. This

data bank might be especially useful in connection with

items 16, 19, and 24 above.

64
Report of Workshop on

Office Machines

(typewriters, calculators, copiers, and microfiche)

Co-chairmen W. Gorman - Government

A. M. LaFave - Industry

INTRODUCTION

After considerable discussion, the participants in this

session agreed that the best system for procurement of

Office Machines by the Federal Government is by the multiple award system. With this assumption firmed, the balance of the meeting was devoted to discussion of ways and

means of improving the multiple award scheme of procurement,

particularly as the multiple award system is involved in obtaining for the Government prompt access to new and improved

products. The following are the recommendations to achieve

this objective.

1 . The GSA contract requirement for national distribution

delays introduction to the Government

Recommendation

Since it is often the case that new products are not

offered nationally at the early stages of introduction

it is suggested that GSA allow multiple award contracts

by regions. This would allow the contractor the necessary sales and after sales service on the new product

and the Government would obtain a new product before

national service coverage is available. It would also

permit small business operating only in one region an

opportunity to supply the Government with new products

in that area.

2 . The "Mandatory Use" of GSA contract may deter the acquisition of new products not available under the contracts

I Recommendation

That GSA give contracting offices greater latitude in

procurement of new products and that GSA be liberal

and prompt in the waiver of the mandatory requirement

when new products or innovative products are offered.

65
3 . The provision for a simple vehicle to encourage coimnunication between user and manufacturer would result in

product improvement

One of the greatest sources of new products and new innovations is the communication link between the manufacturer of a product and the user. It was discussed at

some length that there is considerable lack of "feedback" from user locations to the manufacturer on candid

opinions of product performance, product evaluation and

suggestions for improvement.

Recommendation

Contractors should include in their Government Price

List, or in the instruction manual or operator's manual,

a "request for comments" or an invitation to fill out

a form giving the users' opinions and suggestions on the

office machine he is using. GSA could encourage users

to offer comments of the machine performance to the

highest level of the contractor.

4 . Uncertainty on part of both contractor and user concerning legal and patent considerations highly restricts

exchange of ideas concerning new products or improvements

Recommendation

Government and industry task force be established to

identify causes of constraints and develop solutions.

5 . Statutes and regulations dictate that design specifications, advertised procurement and lowest price are

always in the best interest of Government in the procurement process

These dictates not only retard new product development

but in fact tend to squeeze quality to the minimum

accepted by specification and may cut quality out of

the product.

Recommendation

Certainly other procurement techniques should be given

equal status with the historical "spec-bid" system.

The contracting officers should be given greater authority and the system of indiscriminate reviews be reduced.

Design specifications should be strictly limited. Performance specifications give greater reliability to the

66
Government user but the inclination to meet specifications at "lowest price" is still a deterent to new product development. The performance specifications must

be changed as the product performance and productivity

improvements are introduced. Specification procurement

of standard commercial items should only be used when

it is clear that the Government could save a substantial

sum^ and when it is clear that the specification will

not retard technological improvements .

6 . The word "lowest price" appears throughout the regulations

Recommendation

Change this wording wherever it appears to read "lowest

cost" (not price) and add "considering all factors such

as acquisition cost, operating cost, productivity, support services available, and other factors bearing on

value."

7 . Statutes atid regulations dictate that advertised method

of procurement is generally preferred

Recommendation

The negotiation method be given at least equal status,

and its use promoted where it is in the best interest of

the Government.

8 . The present policy of maximizing procurement by specification impedes innovation

Recommendation

That design specifications be used rarely (if at all)

and performance specifications be used only for equipment and supplies when both 1) an appropriate high level

dollar threshold exists and 2) it is clear that this

method will encourage advancement of technology (not

used if it might retard technology)

.

9 . Contracting Officers are forced into a position of deciding by price rather than value

Recommendation

Contracting Officers be given decision authority commensurate with responsibility, and reviews be sharply reduced .

67
10 . Users of multiple award contracts would benefit from

innovations which would simplify the acquisition of

products which represent greatest value

Recommendation

A. Develop and publish a grid or matrix by machine type

which contains key performance features, including

new features, advanced technology.

B. Determine means to either refuse or discontinue

items which do not meet key performance characteristics (objective is to simplify both contracting

job and users' selection process).

11 . Users of multiple award contracts are not always alerted

to new developments, and suppliers who improve or develop new products are not always given recognition

Recommendation

Request that contractors (under multiple award contracts) include in their contract price list a section

to contain summary statements describing 1) new technology, 2) new (or improved) performance characteristics, and 3) new items and their features.

12 . Current catalog techniques sometimes result in making

difficult the most value effective procurement

Recommendation

Review cataloging procedures to assure that their use

does not impede the acquisition of new or improved

supply products, and to facilitate the use of life

cycle costing.

13 . Buy American Act principles need reexamination

Recommendation

Review principles to determine if their application impedes introduction of new technology.

14 . Increased emphasis on safety needed

Recommendation

All items available under multiple award contracts (or

any other type) should be required to conform with

68
recognized safety standards (currently they may or may

not meet a safety approval)

.

Need for regular Government-industry exchange

Recommendation

The exchange should continue with 1) greater industry

participation, 2) further refinement by commodity

category, 3) more clear definition of objectives, and

4) greater publicity.

69
Report of Workshop on

Photographic and Audiovisual

Co-chairmen Robert Ashenfleter - Government

Hank Kyhos - Industry

MULTIPLE AWARD

The multiple award concept of procurement best provides the

Government with a complete selection of products. Multiple

awards provide for the most technologically available products at reasonable prices and timely delivery. This concept also encourages Government users to seek more commonly

available products to suit their need.

EXPERIMENTAL PURCHASING

Experimental purchasing, with a single type award, offers

a practical tool for focusing on innovation and implementing value incentives. The single award contract is a useful tool to develop the multiple award universe out of

which the broad Federal needs for that product category are

ultimately served.

TECHNOLOGY

The advanced state of technology in the photographic and

audiovisual industry may not lend itself to the ETIP concept, since generally industry is ahead of Government requirements with technology for which Government is not yet

prepared. Government must take steps to update requirements

within to permit commercially available technology to be

accepted more rapidly.

MARKET RESEARCH

General Services Administration should establish a Market

Research group to determine how well they are serving their

user and to identify the user's needs. This group should

also provide Federal procurement forecasts of potential user

requirements for a given period of time. This forecast

would contain such information as type of product needed,

approximate quantity and agency or specific user involved.

This forecast should be made available to industry as well

as within specific areas of Government. It should include

Department of Defense, as well as all other departments of

the Federal Government.

70
SPECIFICATIONS

For commercially available product(s), specifications, other

than those provided by the manufacturer, should not be used

in procurement functions, as industry provides the latest

technology available. If, for some reason, a specification

is deemed necessary, a Performance Specification provides

the flexibility needed for innovation. A Design Specification should be used only for Research and Development procurement peculiar to Government.

71
GLOSSARY OF

FEDERAL SUPPLY SERVICE TERt^S

Formal Advertising

Procurement by competitive bids and awards through appropriate publication of invitations for bids and awarding the

contract, after bids are publicly opened, to that responsible bidder whose bid, conforming to the invitation for

bids, will be most advantageous to the Government, price and

other factors considered. {One of two procurement methods;

the other is procurement by negotiation.)

Negotiation

Under certain circumstances, which are prescribed by law and

applicable regulations. Government procurements may be made

by negotiation with qualified suppliers and without formally

advertising for bids. Negotiation enables the contracting

officer to obtain the benefits of competition on an informal

basis, and, where competition is not available, to use cost

and price analyses to the extent necessary to obtain fair

prices.

Formal Advertising, Two-Step

A form of formal advertising designed to promote the maximum

competition practicable when available specifications are not

sufficiently definite to permit a formally advertised procurement. It is especially useful in procurement of complex

and technical items, to prevent the elimination of potentially qualified producers from the competitive base. The

first step consists of the request, submission, evaluation

and, if necessary, discussion of technical proposals to

determine the acceptability of the supplies or services

offered. The second step consists of a formally advertised

procurement with participation limited to those firms submitting acceptable proposals under the first step.

Purchase for Storage and Issue (GSA Stores Stock)

A method of supply in which requirements are consolidated

and purchased for delivery to GSA supply distribution facilities from where they are issued to agencies as needed.

Consolidated Purchase for Direct Delivery

A method of supply in which requirements are consolidated

and purchased for direct delivery to the use points.

Purchase through Indefinite Delivery Type Contracts

A method of supply, such as Federal Supply Schedules and

Non-stores Term Contracts, in which the contract provides

for the furnishing of an indefinite quantity, within stated

limits, of specific property or services, during a specified

contract period, with deliveries to be scheduled by the

72
timely placement of orders upon the contractor by activities

designated either specifically or by class.

Definite Quantity Contract

A contract which provides for a specified quantity of property

or for the performance of specified services for a fixed period, with deliveries or performance at designated location (s)

upon order.

Firm Fixed Price Contract

A contract which provides for a price which is not subject to

any adjustment by reason of the cost experience of the contractor in the performance of the contract.

Fixed Price with Escalation Contract

A contract which provides for the upward and downward revision of the stated contract price upon the occurrence of certain contingencies which are specifically defined in the contract.

Brand Name or Equal (Purchase Descriptions)

A description of a commercial product by brand name and make

or model number or other appropriate nomenclature by which

such product is offered for sale to the public by a particular

manufacturer, producer, or distributor and setting forth those

salient physical, functional, or other characteristics of the

referenced product which are essential to the needs of the

Government

.

Bid Sample

A sample which is required specifically in the invitation

for bids and which a bidder is to furnish as part of his bid

to show the characteristics of the product offered.

Preproduction Sample

A sample, required by the contract, to be produced under production method techniques and submitted for approval prior

to the start of production. Also called Pilot Model.

Bidder's Supply Potential

The bidder's indicated monthly production capacity.

End Product, Domestic Source

An unmanufactured end product which has been mined or produced in the United States, or an end product manufactured

in the United States, if the cost of the components which

are mined, produced, or manufactured in the United States

exceeds 50 per cent of the cost of all its components.

73
End Product^ Foreign

An end product other than a domestic source end product.

Federal Specification

A description of the requirements of materials, products, or

services, used by or for potential use of two or more Federal

agencies (at least one of which is a civil agency) , or new

items of potential general application, promulgated by the

General Services Administration and mandatory for use by all

Federal agencies.

Federal Standard

A description which establishes engineering or technical

limitations and applications for materials, processes, methods

designs, etc., and related criteria necessary for obtaining

uniformity, interchangeability of parts, etc., for use in

specifications and solicitations for offers. Federal Standards are promulgated by the General Services Administration,

and are mandatory for use by all Federal agencies, including

the Department of Defense.

Standards

Descriptions which establish engineering or technical limitations and applications for materials, processes, methods,

designs, etc.; and related criteria necessary for obtaining

uniformity and interchangeability of parts, for use in specifications and solicitations for offers.

Purchase Description

A statement or document which generally reflects the same

type of requirements set forth in a formal specification,

and which is normally developed for a particular purchase

requirement not covered by an existing specification.

Value Analysis

An organized effort directed at cihc;]yzing the function of

systems, products, specif ications/stan&tards , practices and

procedures, for the purpose of satisfying the required function at the lowest total cost of ownership.

Life Cycle Costing

A procurement technique which considers operating, maintenance, and other costs of ownership, as well as acquisition price, in the award of contracts. The objective of

applying the LCC technique is to insure that the item acquired will result in the lowest total ownership cost during

the time the item's function is required.

Life Cycle Costing Elements

The cost elements of LCC fall in three major categories.

74
1. Acquisition (A) Cost is the unit price of the

product or services being procured.

2. Initial Logistics (I) Costs are the one-time

logistics costs that are identifiable and would

be incurred by the Government for the item being

procured.

3. Recurring (R) Costs are the costs that can be

identified as those which would be incurred in

connection with the operation, maintenance,

management, and other support requirements for

the product or service being procured.

The LCC concept recognizes that the "I" and "R" costs can

be a significant part of total ownership costs, and should

be considered with the traditional acquisition cost. The

inclusion of any "I" and "R" cost elements in a contract

depends both on the characteristics of the item, and on the

ability to clearly identify, measure, and evaluate the items'

performance in terms of these costs.

75
PARTICIPANTS/ATTENDEES

ABSHIRE, Roland V.

General Services Administration

FSS, GSA

CMBG-4

Arlington , Va

.

ALLMENDINGER, Paul F.

Vice President - Engineering

Power Tool Division

Rockwell International

4 00 North Lexington

Pittsburgh, Pennsylvania 15208

AMBLER, Ernest ~, Deputy Director

National Bureau of Standards

Gaithersburg , Maryland

ASHENFELTER, Robert

US I

A

Washington, D.C. 20547

AUGHINBAUGH, Tom E.

International Harvester Company

1707 L Street, N.W.

Washington, D.C. 20036

BACON , Tom

General Services Administration

FSS-FMFP

Washington, D.C. 20406

BAER, George E.

Naval Facilities Engineering Command

200 Stovall Street

Alexandria, Virginia 22332

BAIRD, David R.

3M Company

1750 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

76
BAKER, Sonia

Social Security Administration

63 01 Security Boulevard

Woodlawn, Maryland 21235

BARRA, Ralph

ETIP

National Bureau of Standards

Gaithersburg , Maryland 20760

BATEMAN, Edward C.

U. S. Department of State

Washington, D.C. 20520

BECKETT, John C.

Hewlett-Packard Company

1501 Page Mill Road

Palo Alto, California 94304

BERES, Allan

FSS-GSA

Room 4 27

Crystal Mall, Bldg. 4

Washington, D.C. 20406

BERKE, Joseph

ETIP

National Bureau of Standards

Gaithersburg, Maryland 2 0760

BOWIE, Robert G.

Eastman Kodak Co.

343 State Street

Rochester, N. Y. 14650

BOYER, Kimber H.

U. S. Dept. of Agriculture

Washington, D.C. 20250

BROGAN, Bud

FSS

General Services Administration

Washington, D.C.

BROWNE, Paul

Office of the Assistant Commissioner

for Procurement

Federal Supply Service

General Services Administration

Washington, D.C. 20406

77
BUCKLEY, Daniel III

GSA-FSS

C. M. Building #4, Quality Control

Washington, D.C. 20406

BUNKE, Fred

Assistant Commissioner for Procurement

FSS-GSA

Washington, D.C.

CAMP, Thomas A.

Director, Hard Lines Product Engineering

Sears, Roebuck, and Company

Sears Laboratories, Dept. 817

92 5 S. Homan Avenue

Chicago, Illinois 60607

CARLSON, Joseph

Public Technology, Inc.

114 0 Connecticut Avenue, N.W.

Suite 305

Washington, D.C. 20036

CHURCH, John R.

General Motors Corporation

8-229 GM Building

Detroit, Michigan 48202

CLONEY, James M.

Senior Vice President

GAF Corporation

140 West 51 Street

New York, New York 10020

COOPER, R. S.

Department of Supply and Services

Ottawa, Canada

KIA 0S5

CORNETT, Robert

Council of State Governments

Iron Works Pike

Lexington, Kentucky 40511

CRAM, Sandy

General Services Administration

Washington, D.C. 20406

CUNNINGHAM, J. W.

3511 Chevy Chase Lake Drive

Chevy Chase, Maryland

78
DOWER, G. Lynne

General Motors Corporation

Government and Defense Sales

1660 L Street, N.W.

Suite 503

Washington, D.C. 20036

DUBBE, R. F.

Technical Director

Mincom Division

3M Company - 3M Center

St. Paul, Minnesota 55101

DUTREMBLE, J. P.

Department of Supply and Services

Ottawa, Canada

KIA 0S5

ECKBRETH, Walter

GSA-FSS

Washington, D.C. 20406

EYTEL, Robert H.

Canadian Government

Department of Industry, Trade and Commerce

Ottawa, Canada

FIORI, J. J.

GSA-FSS

Washington, D.C. 20406

FITGERALD, Bob

GSA-FSS

FPMH

Washington, D.C. 20406

FREDLUNG, Robert R.

Director of Administrative Programs

Office of the Secretary of the Treasury

Washington, D.C. 20220

GOFF, James W. , Dr.

School of Packaging

Michigan State University

East Lansing, Michigan 48824

GOLD, Elliott

Office of Automated Data and

Telecommunications Service

General Services Administration

Washington, D.C. 20406

79
GOLDBERG, Mort

Kalart Victor

Plainville, Connecticut 06062

GORDON, Richard

Drexel Furniture Co.

Drexel, North Carolina 28619

GORMAN, William B.

Social Security Administration

6301 Security Boulevard

Woodlawn, Maryland 212 35

GOMOLISKY, John

National Calculator Systems, Inc.

12250 Wilkins Avenue

Rockville, Maryland 20852

HAILEY, Elton

GSA/FSS

FPG

Washington, D.C.

HALL, Albert H.

Executive Vice President

National Institute of Government Purchasing

1001 Conn. Avenue, N.W.

Washington, D.C. 20036

HARBACK, H. D.

FSS/GSA

Washington, D.C. 224 07

HEIFNER, William E.

National Electrical Manufacturers Assn.

1211 Connecticut Avenue, N.W.

Washington, D.C. 20036

HILL, Ray

FSS

CM Bldg. #4

Arlington, Virginia

HOGAN , John F . , Jr

.

Goodyear Tire & Rubber Company

1200 18th Street, N.W. #902

Washington, D.C. 20036

80
HOLLINGSWORTH, Nancy

lURC

822 Conn. Ave.

Washington, D.C.

HOYLE, Clete

Drexel Furniture Co.

Drexel, North Carolina 28619

HYER, Charles W.

Electrical Testing Laboratories, Inc.

2 East End Avenue

New York, New York 10021

ISTVAN, Edwin J.

Institute for Computer

Sciences and Technology

NBS

Room B-264, Bldg. 225

Washington, D. C. 202 34

lUDICELLO, A. (P.W.)

Director, Special Studies Programs

Public Building Service

18th & F Streets, N.W.

Washington, D.C. 20405

JENSEN, W. F.

Marketing Manager-Education & Training

3M Company

St. Paul, Minnesota 55101

JOHNSON, Philip

NBS

Washington, D.C. 20234

JONES, Estelle A.

GSA

Crystal Mall

Arlington, Virginia

JOOSTEN, Richard

American Can Company

Greenwich, Connecticut

KANE, Francis

U.S. Army Natick Laboratories

Kansas St.

Natick, Mass. 01760

81
KEE, Richard M.

Dept. of Transportation

400 7th Street, S.W.

Washington, D.C. 20590

KENNEDY, Michael J.

U.S. Navy Photo Management Office

Naval Air Systems Command Air OSE (5 392E)

Washington Navy Yard Bldg. 200

Washington, D.C. 20361

KNAPP, Charles

Property Management Officer

DHEW OS IAS Supply Oper. Branch

Room G-322 South Bldg.

300 Independence Avenue, S.W.

Washington, D.C. 20201

KOGAN , Ted

Federal Supply Service

General Services Administration

Crystal Mall Bldg. #4

Washington, D. C. 20406

KROGH, Dr. Lester C.

3M Company

Commercial Chemicals Div. 224-51

3M Center

St. Paul, Minnesota 55101

KYHOS, Henry A.

Eastman Kodak Co.

343 State Street

Rochester, New York 14650

LaFAVE, A. M.

Manager, Federal Marketing

1911 N. Ft. Myer Drive

Arlington, Virginia 22209

LEWIS, Jordan D.

Director

ETIP

National Bureau of Standards

Gaithersburg , Maryland

MacDONALD, Weldon B.

General Motors Corporation

Government & Defense Sales

1660 L Street, N.W.

Washington, D.C. 20036

82
GREEN (for Magenta)

Social Security Administration

6301 Security Blvd.

Woodlawn, Maryland 21235

MARTIN, Willard F.

Itek Corporation

Suite 901

2 00 N Glebe Road

Arlington, Va . 22203

MAY , Dave

3M Company

1750 Penn. Ave., N.W.

Washington, D.C. 20006

McAULEY, J.

Federal Supply Service

General Services Administration

Washington, D.C. 20406

McCLOY, W. E.

U.S. Army Material Command

5001 Eisenhower Avenue

Alexandria, Va. 22333

McCREA, Ralph S.

IBM Corporation

4301 Connecticut Avenue, N.W.

Washington, D.C. 20008

McCURRACH, D.

National School Supply

and Equipment Association

1500 Wilson Boulevard

Arlington, Va. 22209

McLELLAN, Bruce M.

National Office Products Asso.

Suite 1200

1500 Wilson Boulevard

Arlington, Virginia 22209

McQUISTON, W. R.

Tektronix, Inc.

P. O. Box 500

Beaverton, Oregon 97005

83
MEHAILSCU, George

14247 Briarwood Terrace

Rockville, Maryland 20853

MICHAELIS, Michael

A. D. Little

1735 Eye Street, N.W.

Room 510

Washington, D.C. 20006

MITCHUM, Jacquelyn D. (Mrs.)

Internal Revenue Service

Contract and Procurement Section

A:FM:N

Room 1320

1111 Constitution Avenue, N.W.

Washington, D.C, 20224

MORRISON, Kenneth T.

Commercial Office Furniture Company

2820 Bladensburg Road, N.W.

Washington, D.C. 20018

MONTGOMERY, John M.

General Counsel

National Paint and Coatings Association

Rhode Island Avenue, N.W.

Washington, D.C. 20005

MULDOON, Thomas J.

Fibre Box Association

224 South Michigan Avenue

Chicago, Illinois 60604

OLSTEIN, Myron

Public Technology, Incorporated

1140 Connecticut Avenue, N.W.

Suite 305

Washington, D.C. 20036

O'MALLEY, Thomas P.

Assistant

Procurement and Personal Property Matters

Office of the Secretary of the Treasury

Washington, D.C. 20220

84
OSTRANDER, Vergil

Public Building Service

18th & F Streets, N.W.

Washington, D.C. 20405

OSTROWSKI, George

c/o Don Sowle Associates, Inc.

664 3 McLean Drive

McLean, Virginia 22101

PADWO, Saul

Room 1001

Main Commerce

Washington, D.C.

PALMER, James A.

Armour-Dial, Inc.

Greyhound Tower

5th Floor

Phoenix, Arizona 85077

PENCE, James L.

Univ. of Illinois & UD Corp.

Urbana, Illinois

PENN, Richard T.

Deputy Director of Operations

ETIP

National Bureau of Standards

Gaithersburg, Maryland

POLL, Dennis B.

U. S. Army Tank Automotive Command

Attn: AMSTA-IMRE

38111 Van Dyke

Warren, MI 48090

POORE, Jim.

GSA Crystal Mall

Arlington, Virginia 20406

PRICE, Moreton B.

General Motors Corporation

Government & Defense Sales

10-158 General Motors Building

Detroit, Michigan 18232

85
RAIA, Richard M.

Polaroid Corporation

549 Technology Square-LL

Cambridge, Mass. 02139

REAM, Norman

Computer Industry Assoc.

511 Aiendida San Juan East

San Clemente, California 92672

RIPLEY, Joseph E.

Goodyear Tire & Rubber Company

1144 E. Maket Street

Akron, Ohio 4 4 316

RISHEBARGER, Donald

Internal Revenue Service

Property Program

1111 Constitution Ave. , N.W.

Washington, D.C. 20224

ROBERTS, Richard W.

Director

National Bureau of Standards

Gaithersburg , Maryland

ROGERS, Lee E.

Naval Facilities Engineering Command

200 Stovall Street

Alexandria, Virginia 22332

ROSENTHAL, Soloman

HQ USAF

AF/ACD, Pentagon

Washington, D.C. 20330

RUBINATE, Frank J.

U.S. Army Natick Laboratories

Kansas Street

Natick, Massachusetts

SALATER, Michael

Carboline Company

350 Hanley Industrial Court

St. Louis, Mo. 53144

SAMPSON, Arthur

Administrator

General Services Administration

86
SCHWANER, Robert

GSA/FMFF

Washington, D.C. 20406

SCHWEITZER, Murray

GSA/FSS/FPWP

Crystal Mall Bldg. #4

Arlington, Va. 70406

SHAW, Dr. Robert W. , Jr.

Booz, Allen, & Hamilton, Inc.

4 733 Bethesda Ave.

Bethesda, Maryland 20014

SHOEMAKER, Delbert L.

Office of Automated Data and

Telecommunications Service

General Services Administration

Washington, D.C. 20405

SMITH, Dave

GSA/FSS

Washington, D.C.

SMITH, J. Edward, Jr.

Logistics Management Institute

4701 Sangamore Road

Washington, D.C. 20016

SMITH, Robert

Westinghouse Electric Corp.

Gateway Center

Pittsburgh, Pennsylvania 15222

SOWLE , Don

c/o Don Sowle Associates, Inc.

6643 McLean Drive

McLean, Virginia 22101

SPANGLER, Lewis

FSS/GSA

Washington, D.C.

TENNY, Dale E.

Packard Instrument Co., Inc.

22 00 Warrenville Road

Downers Grove, Illinois 605l5

87
THOMPSON, W. J.

5001 Calvert Road

College Park, Maryland

TIMBERS, Mike

Commissioner

FSS/GSA

Washington, D.C.

TRAVIS, Charles

FSS/GSA

Washington, D.C.

TRIONE, E. F.

FSS/GSA FMPP

Washington, D.C. 20406

TROY, Terry

NBS

Gaithersburg, Maryland

UNGER, Pete

GSA/FSS

Washington, D.C. 20406

WALLEIGH, Leslie C.

Dep. Dir. , Defense Supply Service-Washington

Room 1D24 5

The Pentagon

Washington, D.C. 20310

WATKINS, Ann

Booz-Allen

4733 Bethesda Ave.

Bethesda, Maryland

WATTERUD, E.T.

Canadian Government Specifications Bd.

Ottawa, Canada

KIA OSS

WEILER, Robert E.

Westinghouse Electric Corp.

Gateway Center

Pittsburgh, Pennsylvania 15222

88
WEISS, Armand

Logistics Management Institute

4701 Sangamore Road

Washington, D.C. 20016

WHELIHAN, Alan

FSS-GSA

Washington, D.C. 20406

WHITCOMB, Ann

GSA

Office of Procurement

Furniture and Furnishings

Crystal Mall, Building #4

Arlington, Virginia

WHITWORTH, Donald P.

Supply Division (031C)

Building and Supply Service

Washington, D.C. 20420

WILK, Joseph R.

Logistics Management Institute

4 701 Sangamore Road

Washington, D.C. 20016

WILLIAMS, Philip

GF Business Equipment

Youngstown, Ohio 44501

WILLIAMS, William D.

Product Line Manager

National Laboratories (Div. Sterling Drug)

225 Summit Avenue

Montvale, New Jersey 07645

WOOD, Edward C.

Stanford Research Institute

333 Ravenswood Avenue

Menlo Park, California 94025

WOOLMAN, R. D.

4927 Battery Lane

Bethesda, Maryland

WOOLMAN, Robert S.

Eastman Kodak

500 12th Street, N.W.

Washington, D.C. 20024

89