ISIBSIR 76-1027

A Survey of Manufacturers'

Views on the ETIP

Procurement Experiment

Volume Three: Ranges

p. Clare Goodman

Product Systems Analysis Division

Center for Consumer Product Technology

Institute for Applied Technology

National Bureau of Standards

Washington, D. C. 20234

February 1976

Final Report

Prepared for Experimental Technology Incentives Program

National Bureau of Standards

Washington, D. C. 20234

NBSIR 76-1027

A SURVEY OF MANUFACTURERS'

VIEWS ON THE ETIP

* PROCUREMENT EXPERIMENT

VOLUME THREE: RANGES

p. Clare Goodman

Product Systems Analysis Division

Center for Consumer Product Technology

Institute for Applied Technology

National Bureau of Standards

Washington, D. C. 20234

February 1976

Final Report

Prepared for Experimental Technology Incentives Program

National Bureau of Standards

Washington, D. C. 20234

U.S. DEPARTMENT OF COMMERCE, Elliot L. Richardson, Seentary

James A. Baker, III, Under Secretary

Or. Betsy Ancker-Johnson, Assistant Secretary for Science and Technology

NATIONAL BUREAU OF STANDARDS, Ernest Ambler. Acting Director

TABLE of CONTENTS

Page

ACKNOWLEDGEMENTS i

ABSTRACT ii

1.0 INTRODUCTION 1

1.1 Background 1

1.2 Factors to be Evaluated 2

1.3 Range Procurement Methodology 3

2.0 METHODOLOGY 3

2.1 Questionnaire Development 3

2.2 Sample Selection 3

2.3 Data Collection 4

3.0 SURVEY RESULTS 5

3.1 Background: The Range Industry 5

3.2 The Government Procurement Mechanism 7

3.2.1 Industry Problems 7

3.2.2 Factors in the Decision to Bid on an IFB 10

3.3 Life-cycle Costing 12

3.3.1 The LCC Formula 12

3.3.2 Maintenance Data 13

3.3.3 Warranty Information 14

3.4 Bidders Conferences 14

3.5 Advertising 15

3.6 Engineering Considerations 16

4.0 DISCUSSION 17

APPENDIX A - Questionnaire for Manufacturers of Gas and Electric Ranges 19

APPENDIX B - List of Firms that Participated in the Survey 23

APPENDIX C - Letter Mailed to Request Participation 24

APPENDIX D - Introductory Paragraph Read to Respondents 25

APPENDIX E - lyfethodology for Calculating LCC 26

APPENDIX F - Government Regulation on Advertising 27

ACKNOWLEDGEMENTS

The author wishes to thank Dr. Charles Fried, Project

Leader, for providing administrative assistance and guidance

throughout the survey. Dr. Fried furnished valuable information to the project staff and edited the manuscripts.

Mr. Joseph Staugaitis, deserves special thanks for his

work in assisting in the design of the survey, and contributing to the data analysis and interviews. Theodore Fody,

Project Monitor, is acknowledged for his helpful guidance

and assistance throughout the project.

The author would also like to thank Mrs. Mary Abbott for

her secretarial assistance in planning interview trips and in

the preparation of this manuscript.
A SURVEY OF MANUFACTURERS' VIEWS CN THE ETIP PROOJREMEISrr EXPERIMEOT

VOLUME THREE: RANGES

P. Clare Goodman

Abstract

This report describes the findings of a survey of nine gas and

electric range manufacturers by the Center for Consumer Product Technology.

The survey v/as conducted for the Experimental Technology Incentives Program

(ETIP) as pari: of its evaluation of a Federal Supply Service (FSS) procurement of ranges. Survey questions were designed to obtain manufacturers'

views on the use of Government procurement policies to increase the rate of

introduction of new technologies into the consumer marketplace. The

qosstions covered the following areas: (1) reasons for participation or

non-participation of a manufacturer in the ETIP ej^^eriment; (2) problems

a manufacturer encounters with existing Federal procurement practices;

(3) acceptability of using life-cycle costing in the bidding procedure;

and (4) effect of the most recent Government procureanent on present and

future corpany operations. Results of the survey are reported, and

inplications are drawn for future ETIP studies of Government procurement

activities

.

Key words: Energy-efficient products; Experimental Technology

Incentives Program; gas and electric ranges; life-cycle

costing; procurement experiments.

ii
A Survey of Manufacturers' Views on the ETTP Procurement Experirrent

Volume Three: Ranges

1. Introduction

1 . 1 Background

The Experimental Technology Incentives Program (ETIP) of the

National Bureau of Standards (NBS) is part of the Federal Government's

efforts to determine vihat can be done to increase the rate at vdiich new

technologies are introduced into the marketplace. The ETIP is part of a

continuing effort by the Federal Government to "vork as a more effective

partner with the private sector in the development and application of

science and technology to strengthen the nation's economy and irrprove

the quality of life." 1/

ETIP has selected Federal procurement practices as an area requiring

special study. Five procurement ej^riments are currently underway to

determine whether it is feasible to stiraalate the developnent, production,

and marketing of energy-efficient products through the use of Government

purchasing practices. Each experiment is planned to last three years

to allow sufficient time for the industry involved to introduce technological innovations.

Thsse five procurements were performed in cooperation with the

Federal Si:pply Service (FSS) of the General Services Administration (GSA)

.

They were intended to determine if changes in procurements, such as the

use of a modified life-cycle cost formula in the bidding procedure, would

increase the availability and recognition of energy-efficient appliances

in the marketplace.

The life-cycle cost {ICC) of an item is the total cost of its

purchase, operation, maintenance, servicing and disposal. A ICC program

has been implemented by the Federal Supply Service. Procurements for the

five products have included some partial form of LCC in their bid price.

None of these LCC foniulas considered all ownership costs, but they

have included some costs other than initial costs

.

The October, 1974 Invitation for Bid (IFB) , sometimes referred to

as a Request for Proposal (RFP) , for gas ranges 2/ and the February, 1975

^ President's Science and Technology lyfessage of March 16, 1972.

2/ "Requirements Contract for FSC-7310 — Ranges, gas operated

freestanding" Solicitation No: FPGA-E-55545-N-11/21/74.

-1-
Invitation for Bid for electric ranges 3// are two of five procurements

perfonned jointly by ETIP and FSS.

1.2 Factors to be Evaluated

In order to determine v^ether the Federal procurement process can be

used to stiinulate the marketing of energy-efficient products, ETIP has

undertaken a program to evaluate its five prDcurCTient experiments. The

Product Systems Analysis Division (PSAD) of NBS was asked by ETIP Personnel

to assist it in its evaluation of gas and electric range procurements.

PSAD's role in the evaluation was limited to conducting a survey of firms

that manufacture household ranges. The survey was designed to include

a saitple of firms in the industry rather than just corpanies that bid

on ETIP experiments. Information was sought on:

(A) Reasons for participation or non-participation of

a conpany in the most recent FSS procurements,

(B) Problems that a manufacturer encountered with

existing Federal procurement practices,

(C) Acceptability of using life-cycle costing in

the bidding procedure,

(D) Effect of the most recent Government procurements

on present and future corpany operations, including

support for engineering and investnent in research,

types of themes used in advertising canpaigns, etc.

The survey examined the outcone of the ETIP experiments as determined

by the manufacturer responses in producing new product development in

household ranges. The author was not involved in the design of the experiment and the particular life-cycle cost formula used. No atteirpt was

mde to evaluate v^ether the particular life-cycle cost formula utilized

was the most effective mechanism for bringing about increases in the

energy efficiency of ranges.

37 "Requirements Contract for FSC-7310 — Ranges, Electric, Household"

Solicitation No. FPGA-C-55571-N-4/1/75

.

These two documents can be obtained frcm the Business Service

Center, General Services Administration, Room 1701,

7th and D Streets, S. W., Washington, D. C. 20407.

-2-
1.3 Range Procurement Methcxiology

Previous FSS procurements of gas and electric ranges had been awarded

solely to the lowest bids that inet the IFB specifications. The total cost

of ownership was not included in these previous bids. The bids of the two

IFB's being studied were coiiputed in terms of a modified life-cycle

cost formula.

The FSS does not purchase ranges directly from the successful

bidder, but only identifies the item and the contractor in a FSS supply

schedule, from which Government agencies make purchases. In order for

a ccmpany to be placed on a supply schedule they must successfully bid

on the procureiients

.

The estimated number of residential-type ranges to be purchased by

Government agencies for the experimental procurement was estirtHted at

22,200 gas ranges and 3,720 electric ranges. These represent approximately one year's purchases for the period beginning February 1975 for

gas ranges and July 1975 for electric ranges. Bids in these procurements

were requested for 10 regions in the U.S. for the follcwing model sizes:

51, 76, 91, and 102 cm. (20, 30, 36, and 40 inch) gas ranges; and

51, 60, 76, and 102 cm. (20,24, 30, and 40 inch) electric

ranges.

Eight films bid on the gas range procurement. Three of these firms

received FSS contracts. Five firms bid on the electric range procurement

and t^^o received FSS contracts.

2. Methodology

2.1 Questionnaire Development

A preliminajry set of questions was derived from discussions with

ETIP staff. Experience gained fram a previous ETIP evaluation was also

useful in the design of the survey. 4/ Suggestions for questions in the

survey were sought frcm members of the Product Standards Development Section

of PSAD and representatives of FSS. Representatives of the Gas Appliance

Manufacturers Association (GAMA) and the Association of Home Appliance

Manufacturers (AHAM) reviewed and concurred with all of the survey

questions. A final draft based on the results of these meetings was

reviewed by ETIP and became the final version of the questionnaire as that was used in the survey (Appendix A)

.

2.2 Sairple Selection

Cjcmpanies considered for participation in the survey were selected

from lists provided by GAMA, AHAM, and FSS of gas and electric range

47 Unpublished manuscript, C. Fried, F. Bents, and T. Fody,

"Survey of Window Air Conditioner Manufacturers," June 1975.

-3-
manufacturers. Ccsnbined, these three lists included a ccftplete list of

domestic gas and electric range manufacturers.

Because of time and money contraints it was decided that the final

sanple size would be nine firms. These firms were to include a representation of both bidders and non-bidders, as well as large and small manufacturers. The three largest gas range manufacturers (as measured by

their percent of sales in the gas range market) were selected- All three

of these conpanies were also large manufacturers (over 5 percent of the

market) of electric ranges. Both the gas and electric range procurements

had several bidders (eight for gas and five for electric) , and of these

four gas bidders and three electric bidders were randomly selected. Two

of the firms were bidders of both procurements, so a total of five firms

had bid on at least one of the procurements. Tv\o of the five bidders

were also large manufacturers so the remaining sairple (three additional

firms) was drawn randomly from the lists discussed above. All nine of

the manufacturers chosen were surveyed between August and September 1975

(See Appendix B for list of manufacturers.)

2 . 3 Data Collection

Prior to the first contact by a survey team member, each of the

conpanies scheduled to be visited was sent the letter shown in Appendix C.

The corpany official to whom the letter was addressed was designated by

GAMA or AHAM as the appropriate contact. Shortly after the letters were

sent, telephone calls were placed to each of the officials to whom the

letters had been addressed. The caller further described the purpose of

the proposed meeting and requested that caipany representatives attend

the meeting who were familiar with Government procurement. In addition,

officials from the marketing and engineering departments of the ccfrpany

were asked to attend, if possible. The number of executives interviewed

at a session ranged frcm one to five individuals, depending on the

oonplexity of the ccxtpany's organization.

The interviews began with a brief account of the motivation for the

modified procurement experiment and the purpose of the survey. A standard

explanatory paragraph was read to all participants (Appendix D) . Participants were also told that they would receive a copy of the final report

after it was published.

The interviews were conducted in an open-ended maner, generally

lasting from two to three hours. The interviewer read each question to

all participants at the same time. All of the conpanies were cooperative

and helpful.

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3. Survey Results

3.1 Background: The Range Industry

There are over 30 gas and electric range manufacturers in the

United States. Of these manufacturers, the major share produce both gas

and electric products. In this survey both gas and electric manufacturers

are treated as a single entity, vAienever possible. One of the firms in

the sample produced only gas ranges (no electric range production) and

two produced only electric ranges.* Even though the sample was mixed,

it was unnecessary to differentiate between gas, electric, and gas and

electric range manufacturers for most questions.

Consumers have become more interested in middle and top of the line

models that contain more features. Self-cleaning and continuous-cleaning

ovens have had a tremendous iitpact on the household range market. These

features are extremely common, and only the bottom line models offer con- ventional ovens. Ceramic top ranges are also gaining popularity.

Based on discussions with the gas and electric range manufacturers,

it appears that a definite interest in obtaining Government business does

exist. This is shown in Table 1.

Table 1 . Do you actively seek Government business?

Number of Responses

Yes 7

No 1

Scmetimes 1

*Occasionally a manufacturer vAio produces only one type of range (e.g.

electric) may purchase the other type (e.g. gas) of range and label them

with their own brand name. This is done for marketing purposes.

-5-
However, as shown in Table 2, Government purchases do not account

for a large percentage of sales for most of the surveyed manufacturers.

Table 2 . What percentage of your total

company business is Government

range business?

Number of Responses

None (or practically none) 1

Less than 1% 4

2-8% 3

9-14% 0

More than 15% 1

These percentages given above include all Federal Government purchases

and are not limited to FSS contracts. FSS is not the only procurement office

for Government ranges, since the Department of Housing and Urban Development

(HUD) has its own procurement mechanism. An inquiry was made to deteimdne

the percentage of Federal range purchases which were represented by this

FSS contract, however this information was not available.

Of the nine firms contacted, three used more than one method to obtain

inforTTiation about Government procurements. The remaining firms used only

mailing lists — such as the FSS bidders list. Table 3 lists the methods

for obtaining information on Government procurements and the number of

firms that use each method.

Table 3 . Hew do you find out about specific

Government procurements?

Number of Responses*

FSS bidders list 7

(receive copies of

IFB directly)

Other mailing lists (HUD etc.) 9

CCffimerce Business Daily 1

Personal contacts 2

Trade Association Newsletters 1

*The total nijmber of replies exceeds nine when one

or more conpanies provide more than one response.

-6-
3.2 The Goveminent Procurement Mechanism

3.2.1 Industry Problems

Eight of the nine oonpanies indicated that there were difficulties

in doing business with the Government attributable to the Government's

purchasing procedures. Table 4 sunrnarizes some of these problems. All

nine oarpanies had some knowledge of the Government bidding process.

Table 4. Do you think Government purchasing

procedures make it difficult, or

actually discourage, doing business

with the Government? All respondents

replied "yes", so they were asked

for details.

Number of Responses*

1. Specification Problems

Non-standard specifications 2

References are made to other specifications not included in IFB (RFB) 3

Too many different specifications 1

2. P^jervork and Manpower Problems

Too much paperwork 4

Statements in IFB are difficult

to follow 2

Waiting for federal inspector is

inconvenient 1

3. Burdenscm requirements in order

to participate

Verification of test data is difficult 1

Unnecessary testing required 2

Shipping of very small numbers

should not be required 2

Shipping (different from

normal procedures) 2

*The total nurriber of replies exceeds nine when one or more

ccttpanies provide more than one response.

Several conpanies felt that the Government gains very litte, if

anything, in the way of better performance or quality by stipulating procurement specifications v^ch differ from "standard" production models

(e.g., porcelain oven coupled with a luxury lighted backsplash — not a

standard item) . Bids for procurements with non-standard specifications

require excessive amomts of engineering and administrative manpower. This

is felt to be an unnecessary loss if the oonpany's bid is not won.

-7-
One firm's representative objected to the system of including

shipping cost factors by zones in the bid. He said this system gives an

advantage to manufacturers closest to the zones with highest purchases

and also that sporadic staggered orders within a given zone increase the

shipping charges. A second canpany stated that it should not be required

to ship only one range to a location at a time.

Government required product testing was mentioned as being of

questionable value. One firm stated that destructive testing should not

be required prior to the award of a contract. Another firm said that

destructive testing should not be required at all. Four conpanies

claimed that AHAM, AGA, or UL testing requirements were sufficient, and

that the Government should accept these requirements rather than duplicate

them with additional testing of its own. Table 5 sumnarizes these views

on product testing.

Table 5 . Suggestions for reducing costs of testing products.

Number of responses

Use only AHAM, AGA, or UL testing

requirements 4

Continue separate Government testing 2

No answer given 3

Several carpanies suggested that Government oould get a greater

response to its IFB's if it were to use existing AGA, or UL standards,

eliminating the development of special model designs. The general

feeling was that Government business is not significant enough to make

the redesign of assembly-line products wori±^diile. Table 6 summarizes

the suggestions made by the respondents on how Government might get

increased participation.

-8-
Table 6 . What c3o you think the Goveminent could do to

increase the number of responses to its IFB's

Number of Responses*

Sirrplify the bidding procedure 5

Accept AGA. and UL standards and

specifications 3

Make specifications and IFB

more readable 2

Require only standard size ranges 1

Eliminate inspection procedures 1

Add the continuous cleaning feature 1

No answer. Government should not

seek to encourage participation 1

*The total number of replies exceeds nine when one

or more cotpanies provide more than one response.

-9-
3.2.2 Factors in the Decisicai to Bid on an IFB

The decision to respond to an IFB was reported to be based on one

or iitDre of the factors shovn in Table 7

.

Table 7 . If you bid on a given contract v\^at are

the prime factors in your decision?

(What made you bid on these contracts?)

Number of Responses*

Corpany has a product available

with which they can possibly

win the IFB 7

Conpany meets all necessary

Government specifications

(including requirement dates) 6

Corpany feels it will make a profit from the contract 2

Conpany needs additional business 2

Ccnpany feels it has a public

responsibility to bid 1

Inventory levels of the ccitpany 1

*The total number of replies exceeds nine when one

or more conpanies provide more than one response.

All firms interviewed produced Government bought ranges as part of

their regular production lines. No catpany had an engineering department

exclusively devoted to Federal purchases. Several firms had one or more

persons who dealt with Government bids. At least one conpany indicated

that Federal procurements, with their special requirements, necessitated

separate treatment.

-10-
The firms surveyed were asked to state what criteria they would

recsDimend FSS use in its future procurements of gas and electric ranges.

Table 8 . If you were in Federal Procurement, how

vrould you purchase ranges? What factors

would you use?

Number of Responses*

Liife-cycle costing approach 3

Price 5

Performance or Quality 3

Serviceability 3

Maintenance costs and parts 2

Reliable manufacturer 4

Ability of manufacturer to meet

schedule 1

Standard product offered to the public 1

Ability to meet AGA & UL standards 3

Pppearance 1

Durability 1

Multi-award system 1

*The total number of replies exceeds nine v^en one or more

cdipanies provide more than one response.

Three respondents mentioned life-cycle costing as a possible

criterion for purchasing ranges. Several others indicated that they

would use the proposed factors in a life-cycle costing formula, such

as price, performance, serviceability, or maintenance costs. These

firms also indicated that life-cycle costing should include a factor

of energy efficiency.

-11- 1
3.3 Life-cycle costing

3.3.1 The ICC Formula

A life-cycle cost (LCC) was used in the bid price in responding to the

IFB for both gas and electric ranges. The formula for the LCC was designed

by FSS and was not meant to represent a ccirplete formulation including all

ownership costs. The LCC formulation consisted of initial purchase price

plus a discounted cost of energy to operate the ranges for an assumed life

of twelve years. The LCC formula was identical for both gas and electric

ranges. As quoted in the IFB's, the LCC formula is L = X + Y

"where

L = Life-cycle cost (present value dollars) of a product

X = Initial cost of product according to submitted bid price

Y = Present value sum of the annual operating cost (y) of the

product over its expected life

Operating cost, y, for both gas and electric ranges will be

conputed through the methods described herein, although

certain parameters will be assigned different values

depending upon the type of range being evaluated." 5/

The value to be used for y is computed from a formula (reproduced in

Appendix E) incorporating range surface and oven requirements for energy

to cook food for both gas and electric ranges.

Although the respondents did show an interest in the LCC concept

they also showed some reserve with regard to its application to ranges.

Concern centered on the difficulty in defining normal usage (determining

a value for Y) which affected by variables such as oven and surface

element sizes as well as cooking utensil size, shape, and condition.

The degree to which any accumulated test data represented a real-life

situation was questioned.

Only one company indicated satisfaction with the current Government

LOC formula. Hovever, only one ccnpany showed strong opposition to the

use of some type of life-cycle costing in Government procurements. The

remaining companies indicated some interest in the concept of life-cycle

costing but felt that the present formula was insufficient. All of these

firms claimed that more data should be collected on average usage, and

that research was needed to determine if normal operating costs, can in

fact, be measured at all. One firm felt that FSS should eliminate the

KXi: forraola from all household range procurements until AHAM has developed

an acceptable formula.

5/ "Requirements Contract for FSC-7310 — Ranges, gas operated

freestanding" Solicitation No." FPGA-E55545-N-11/21/74.

"Requirements Contract for FSC-7310 — Ranges, Electric, Household"

Solicitation No. FPGA-C-55571-N-4/1/75.

-12-
The LCC formala assumes a twelve year product life for both gas and

electric ranges. The respondents varied on v^at they felt was an accurate

estimate of the life expectancy of a range. The corrpanies' estimates varied

from 10 to 20 years, with seme firms giving gas higher estimates than

electric ranges. None of the firms were sure enough of their estimates

so they could disagree with the arbitrary twelve years given in the LCC

formula. Several indicated that the life is shortened siirply because

ranges tend to be replaced for reasons other than mechanical breakage

such as the ranges appearance.

Seven of the nine respondents said they v«Duld be interested in a

presentation on the LCC formula by FSS.

MDre data than is currently available is needed for FSS to include

maintenance or service costs in the LCC formula. The next question

(Table 9) attempted to find out if such data are collected by the

ociipanies that were interviewed.

3.3.2 Maintenance Data

Table 9 . Does your corrpany determine maintenance

data for ranges?

Number of Responses

No 2

Yes, very limited data 2

Yes, during the warranty period

only 4

Yes, warranty period plus some

additional part replacement data 1

In most cases, the firms would probably refuse or hesitate

to release such service data to FSS for use in its oonputation of

life-cycle costing. Table 10 clearly indicates this hesitation.

-13-
Table 10. Is this data available to the Government?

Number of Responses

Yes 1

Maybe 3

Probably not 1

No 2

No answer given 2

If FSS were to rely upon the nanufacturers to supply data on naintainability, the responses above indicated that the manufacturers

wDuld not or vould not be able to sii^jply the necessary data to extend

the LCC formula beyond initial and operating cost.

All nine ccampanies indicated that the Government could obtain whatever warranty it desired if it were willing to pay for it. In most cases,

warranties provided to the Government were similar to or slightly better

than those offered to private consumers.

When asked if the Government makes use of its warranties; one coarpany

indicated that the Government rarely uses them; two companies stated that

the Government did, but were unsure of how often; the remaining corpanies

were unsure or had no experience. The records of most companies did not

allow a ccffiparison to be made between consumer and Government warranty

usage data.

The percentage of the range price used to pay the expense of the

warranty depended on the model offered. The amounts varied from less

than one percent to nearly ten percent for sane models. When asked if

their ccmpany would lower its bid price if the Government waived the

warranty, 6 ccarpanies said they would, while the remining 3 said they

wDuld not.

The Pre-bidding Conference is designed to provide FSS with a chance

to discuss the required specifications with industry and to explain the

bidding process and the LCC formula.

3.3.3 Warranty Information

3.4 Bidders' Conferences

-14-
All of the ociipanies felt that firms represented vrould not openly

discuss their ideas at such a conference. Several interviewees said that

they would be very careful as to what they said in front of their conpetitors. Six indicated that Bidders' Conferences would not be beneficial to

the Government in obtaining industry's reactions to IFB specifications.

Seme ccnpanies said they wDuld consider attending a bidders' meeting;

others were unsure as to their interest in attending; two said they would

not attend under any condition. At least three conpanies indicated a

preference for individual sessions with FSS over group meetings. One

oortpany felt Bidders' Conferences should be held only for extremely

large bids.

3 . 5 Advertising

Ihe discussion on advertising elicited a variety of responses.

Several firms were unsure of their answers and changed them during the

discussion. A GSA regulation prohibits a firm fron advertising a Government procurement if a suggestion is made that the Government en- dorses or prefers the product or ocxisiders it to be s\perior to other

products, (i^jpendix E) .

Table 11. If you were awarded a contract by FSS for

a product containing a new technology, would

you want the Government to advertise this

fact?

Number of Responses

Yes 3

Unsure 2

No 3

No answer, would not produce

a new technology 1

Tlie responses to the above question showed considerable variations.

One firm that was interested in having the Government advertise the award

felt that only consumers should be informed; the second felt only

Government publications should include the advertisements; the third

felt that the Government should not release any technical data to competitors. The remaining respondents felt that the Government should stay

out of advertising.

-15-
One question in the survey attenpted to determine if relaxing the

prohibition against advertisement of winning a FSS procurement would be

an added inducement to bid on future procurements. A large share of the

firms indicated that this would not be an incentive. One firm felt that

any advertising of the award would be unfair to manufacturers who did

not bid. This is shown in Table 12.

Table 12. If a successful bidder were able to

advertise a FSS Procurement would

this be an added incentive to bid?

Number of Responses

Yes 2

No 7

3.6 Engineering Considerations

Several of the respondents named problems that they felt were due to

technical factors included in the gas and electric range procurements.

This is illustrated by the answers referenced in Table 13.

Table 13 . Do you think the concern for energy efficiency

inplicit in the RFP was sufficient?

Number of Responses*

Yes:

The RFP was sufficiently concerned with

energy efficiency.

No:

(1) The LCC formula was not technically sound

(2) Assunptions made in the WP were incorrect

(3) More time should be spent developing

a more representative LCC formula

(4) More detail should be included in an LCC

formula, if one is going to be used

No answer

*The total nuntoer of replies exceeds nine when one or more

ccmpanies provide more than one response.

-16-
All of the inaniifacturers said that inore energy efficient ranges

will involve considerable engineering expense and effort. The technology

presently exists for some changes that vrould increase energy efficiency,

but the inanufacturers felt that the price of such models would be a deterrent to the consumer. At least one oonpafiy felt that energy related

basic research involved huge amounts of money and facilities, both of

which are hard to obtain.

Several suggestions were made as to how to make ranges more energy

efficient. The following were suggested: (a) additional insulation;

(b) electric ignition, instead of pilot lights; (c) convection ovens;

(d) smaller ovens; (e) less input of energy to burners; (f) "thermal

conductive resistant" finishes; (g) more efficient elements (better heat

transfer) . One conpany felt that the most effective way to reduce

energy consumption of ranges is to educate the public to reduce the

amount of BTU's they use viiiiile cooking.

All cotpanies were familiar with the pilotless range. More than

half of the carpanies already had a pilotless range or were considering

the introduction of such a model into their product line.

TSfJO of the nine firms said that their engineering staffs were of

sufficient size and cotpetence to respond to any engineering efficiency

programs. The other firms stated that they spent some time on energy

research but felt that other priorities needed greater involvement of

their engineering staff. Most of the carpanies were engaged in a research and development effort, but it was usually a part of the regular

engineering program. Many of the firms used outside consultants or

engineering firms to assist with their research and development. None

of the firms had a separate engineering effort for Government contracts.

4. Discussion

The primary objective of the ETIP procurement experiments with gas

and electric ranges was to determine if the Government procurement

mechanism could be used to bring about the development of more energy

efficient range models than were previously (to the procurement ej^jeriraent)

available. Since no new range models with significant energy efficiency

usage iirprovements were bid, and no new energy efficient models are to

be introduced to consumers, as a result of the ej^riment, in the immediate

future, we cannot conclude that the experiment was successful.

Hiere are a numter of factors that may account for the lack of

success. The Federal Government exerts only a linaited amount of leverage

in the range industry marketplace. Consequently, the profits to be

realized from selling an energy-efficient range to the Government may be

insufficient to offset the large (capital) investments required to

produce such a model, assuming that significant gains in energy efficiency

cannot be realized with minor modifications to exisiting model lines.

-17-
A very significant factor for determining range model lines available is

the demands of the consuming public, v^ch in turn are influenced by

proinotional efforts by the irianufacturers and technological breakthroughs.

There are a number of other factors that probably contributed to

the lack of success of the ETIP procurement experiment. Chief among

these was the lack of agreement between ETIP on the one hand and the

range manufacturers on the other regarding the appropriateness of the

LCC formula used in the procurement. In particular, there was disagreement

over what the appropriate mechanism should be for determining energy usage

costs.

On the encouraging side, a number of manufacturers stated they were

pleased that the Government is experimenting with life-cycle cost purchasing

rather than the lowest initial price to purchase gas and electric ranges.

A few said this might influence the responding to future Government procurements. A number of firms indicated they were introducing energy

savings devices on new models, but that this was in response to perceived

(by manufacturers) consumer demands, as well as other Federal programs to

encourage more efficient energy use. In surmary, FSS/ETIP procurements

for ranges have met with positive response by industry, who would like to see the LCC formula improved upon. Iirprovement of the LCC formula would

probably increase the Government's opportunity to obtain lower life-cycle

cost ranges. However, this probably would not influence manufacturers

to introduce new energy efficient technology.

USCOMM-NBS-DC -18-
APPENDIX A

Questonnai re for Manufacturers of Gas and Electxic Ranges

I. Sales and Market

1. What are the total sales of gas and electric ranges (in units)

in the U.S.? Do you have them for this year and the two

previous years? If not, where can I obtain this data?

(Note: only ask this question of one ccrtpany.)

2. What percentage of your overall operation is Government business?

3. Do you actively seek Government business?

4. How do you find out about specific Government procurements?

i.e.. Commerce Business Daily; trade association newsletters, etc.

5. Do you read the Comnerce Business Daily regularly?

6. WINNING BIDDERS ONLY: Will the appliance produced in fulfillment

of this contract get into the consumer market?

IF NO: Why not?

IF YES: Will an advertising canpaign acccnpany it,

calling attention to its energy-saving qualities.

NON-WINNING BIDDERS ONLY: Did you intend to enter the appliance

v^ch vrould have satisfied the contract into the consumer market?

Procurement Mechanism

1. Have you previously bid on a Government contract?

IF YES: What product?

2. Do you think Government purchasing procedures make it difficult,

or actually discourage, doing business with the Govemitient?

IF YES, ASK FOR DETAILS AND SPECIFIC PAST EXPERIENCES.

3. If you do bid on a given contract, what are the priite factors

in the decision?

4. What made you bid or not bid on this contract?

5. What do you think the Government could do to increase the

niinber of responses to its RFP's?

-19-
6. Does your carpany treat Goveinment business as a separate

niarket from oonsumer business? How? In what way?

7. If the type of procurement use in this PFP continues to be

used, will it change your policies vis-vis Government business?

8. What suggestions do you have for reducing the cost of testing

ranges

.

9. What ccrnpany policies, if any, will be effected by the procurement procedures used in the ETIP experiment? What effect?

Hov, if at all, will the following areas be affected?

Research and Development

Design and Marketing

Marketing

Advertising

Related Pixxiuct Lines

Other

10. If you were in Federal Procurement, how would you purchase

ranges? What factors would you use?

11. Hov vrould you like to see the Government construct a life_cycle

cost fonnula?

12. Would you be interested in receiving a Government presentation

on LCC?

13. What is the life expectancy of household ranges?

14. Does your ccnpany determine maintenance cost data for its

products?

IF YES, ASK FOR DETAILS.

15. Is this data available to the Government?

16. If you were dealing with the Government, WDuld it get the

same warranty as the consumer?

17. What percentage of your Government business makes use of its

warranty?

18. What percentage of your unit costs is represented by the warranty?

19. If the Government didn't want a warranty, would this be reflected

as a lower initial bid?

-20-
III. Pre-Bid Discussion

1. Hav successful do you think Bidders' Conferences would be in

obtaining industry inputs regarding Government specifications?

2. Would our coirpany attend? IP NO: Why Not?

3. Do you think industry vould openly discuss its ideas at such

a conference? What are your ideas on the topic of Bidders

Conferences in general?

IV. Advertising

1. If you were awarded a contract by the Government for a product

containing new technology, wDuld you want the Government to

advertise this fact?

IF YES: How would you prefer it to be done?

IF NO: Why not?

2. If a successful bidder were able to advertise and ETIP/FSS

Procurement, wDuld this be an added incentive to bid?

3. Can you suggest other ways in v^ch the Government might

advertise its new procurements?

V. Engineering

1. Do you think the concern for energy efficiency irrplicit

in the RFP (IFB) was sufficient (i.e., in terms of what

could be done)? Should other performance factors have been used?

2. Do you feel that the capability exists now to produce a more

energy-efficient appliance without the need for major engineering

innovations?

IF YES: What do you think is holding it back?

IF NO: Do you think there is an adequate industry-wide

engineering effort toward that end?

IF NO: What do you think is the reason?

3. Hew can gas and electric ranges be made more energy-efficient?

4. Is your engineering staff of sufficient size and professional

level to be able to respond to efficiency programs utilizing

current state-of-the-art technology?

-21-
5. Is there a separate engineering effort for Govemirent cx^ntracts?

6. Are you engaged in any R&D effort?

IF YES: Do you have a separate R&D staff?

How large? Is R&D an additional duty of the

engineering staff?

7. What do you think can be done to encourage the industry as a whole to adopt a new energy-conscious ethic in its design

philosophy?

GAS RANGES: Is there an industry effort to inprove the

efficiency of pilot lights? IF NO: Why not, since it has

been shown that pilot lights use a large percentage of the

energy consumed by gas ranges? IF YES: Could you explain

what it entails?

-22-
APPENDIX B

List of Firms that Participated in the Survey

Brown Stove t^torks, Inc.

P.O. Box 490

Cleveland, Tennessee 37311

Caloric Corporation

Meeting House Road

Topton, Pennsylvania 19562

Crown Stove Works, Inc.

4627-35 W. 12th Place

Chicago, Illinois 60650

Frigidaire Division

General Motors Corporation

300 Taylor Street

Dayton, Ohio 45401

General Electric Conpany

J^pliance Park

Louisville, Kentucky 40225

Magic Chef, Inc.

740 King Edward Avenue

Cleveland, Tennessee 37311

RDper Corporation

1905 West Court Street

Kankakee, Illinois 60901

Sunray Stove Corpany

Division of Glenwood Range Gcxrpany

Delaware, Ohio 43015

The Tappan Coitpany

Tappan Park

Mansfield, Ohio 44901

-23-
APPENDIX C

Letter Mailed to Request Participation

August 1 , 1975

Dear:

In August of last year, the Federal Si:?)ply Service requested technical

proposals and bids for gas and electric ranges. This procurement was

initiated under the Experimental Technology Incentives Program (ETIP) , and was one of several experiments designed to investigate the efficacy

of stimulating the rate of entry of new technology into the marketplace

via Government procurement procediires.

These experimental procurements conducted by the Federal Supply Service

have not yet been evaluated to determine their effect on future product

development; consequently, ETIP and the Federal Sipply Service are seeking

to collect information to help evaluate the program. Specifically, we

v^uld like to visit your firm and speak with one or more people in order

to collect basic information.

The type of information we are concerned with relates to the reasons your

firm did or did not participate in this procurement. Your organization's

views on the suitability and utility of achieving accelerated pioduct

development through this experimental mechanism will also be discussed.

More sensitive information, such as your firm's future design and production plans, current R&D effort, or marketing and advertising strategies

may be discussed if it spears that this information might provide quantifiable evidence or program irrpact. Because of the range of topics, discussion

with a member of both engineering and market research departments would

probably be desirable.

All infoirmation collected frcxn participating firms will be controlled by

the National Bureau of Standards and not released in its basic form within

NBS or elsewhere. The information will be summarized and presented in a

form that will not disclose the views, opinions or market profile of

individual participants. Participating organizations will receive

copies of the report after printing.

I hope that your firm will be able to participate in the evaluative phase

of this program. A minimum of time should be involved and the results on

the analysis could be of value to all of us. I would appreciate hearing

from you at your convenience concerning who should be contacted in regard

to the data collection aspect of the evaluation.

Sincerely,

Theodore J. Fody

Chief, Procurement Policy Area

Ej^rimental Technology Incentives Program

-24-
APPENDIX D

Introductory Paragraph Read to Respondents

Hie Federal Si:ipply Service is currently involved in a number of

ejqjeriments to determine v^ether the rate of entry of new technologies

into the oonsuraer marketplace can be stimulated by means of Goveimment

procurements. As part of these experiments, bids for gas and electric

ranges were recently solicited. (Show copy of RFP/IFB.)

The National Bureau of Standards has been asked to evaluate these

procureriBnt es^seriraents . As part of this evaluation, we are speaking

with people from a number of firms in the industry. We are interested

in finding out whether the procurement approach taken by the ETIP is

practical and effective, and are particularly interested in learning

industry's viewpoints on the matter. Your answers to the following

questions will help us in the program evaluation. All the information

you provide us will be controlled at NBS, and will remain anonymous as

to ooqpany identification. The report generated by this evaluation will

be in siimary form, without individual ccarpanies being specifically

identified; of course, your firm will receive a copy.

-25-
APPENDIX E

Me1±iodology for Calculating JjCC*

Taking "y" send the 12-year prcxiuct life, the present value sum of operating

costs, Y, will be ccnputed as:

Sum of discount factors for years 1 through 12, at a rate of

10 percent, is 6.814 . Therefore,

Y = (6.814)y

Where y = (Ens + Eno ) C, and

(ET Eo)

Ent = Ens + Eno = Average total energy needed to cook food for 1 year.

4.009 X 106 BIU = 40.09 THERMS (for Electric Ranges)

9.809 X 106 BTU = 98.09 THERMS (for Gas Ranges)

(1 THERM = 100,000 BTU; 1 KWH = 3412 BTU)

Ens = Average total energy needed to cook food on range surface units.

Eno = Average total energy needed to cook food in a range oven.

ET = Average total thermal efficiency of the surface units of one

range (ej^ressed as decimal portion of 1.00).

Bo = Thermal efficiency of one range oven (expressed as decimal

portion of 1.00) .

C = Cost per THERM (see RATES FOR COMPUTING LCC in the IFB)

Ens = 26.73 Therms (for Electric Ranges).

65.39 Therms (for Gas Ranges)

Eno = 13.36 Therms (for Electric Ranges)

32.70 Therms (for Gas Ranges)

*Quoted from "Requirements Contract for FSC-7310 — Ranges, gas operated

freestanding" Solicitation No: FPGA-E-55545-N-11/21/74

.

and

"Requirements Contract for FSC-7310 — Ranges, Electric, Household"

Solicitation No. FPGA-C-55571-N-4/1/75.

-26-
APPENDIX F

Government Regulation on AcSvertising

Current Clause 44 of Form 1424: Advertising of Award

"44. Ihe Contractor agrees not to refer to awards in commercial

advertising in such a manner as to state or imply that the product

or service provided is endorsed or preferred by the Federal Government

or is considered by the Government to be superior to other products

or services."

-27-
NBS-n4A (REV. 7-73)

U.S. DEPT. OF COMM. BIBLIOGRAPHIC DATA

SHEET

1. PUHLIC ATION OK R I'. PORT NO. NBSIR 76-1027

2. Gov't Accession

No.

3. Recipient's Accession No.

4. I lTl.l-; AND SUBTITl.l-: A Survey of Manufacturers' Views on the ETIP Procurement

Experiment. Volume Three: Ranges

5. Publication Date

6. Performing Organization Code

7. AUTHOR(S) „

P. Clare ^, Goodman ^ ^ 8. Performing Organ. Report No. NBSIR 76-1027

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

10. Proiect/Task/Work Unit No.

11. Contract /Grant No

12. Sponsoring Organization Name and Complete Address (Street, City, State, ZIP)

Experimental Technology Incentives Program

National Bureau of Standards

Washington, D. C. 20234

13. Type of Report & Period Covered

Final

14. Sponsoring Agency Code

15. SUPPLEMENTARY NOTES

16. ABSTRACT (A 200-word or less (actual summary of most si^ificant information. If document includes a significant

bibliography or literature survey, mention it here.)

Ihis report describes the findings of a survey of nine gas and

electric range manufacturers by the Center for Consumer Product Technology.

The survey was conducted for the Experijnental Technology Incentives Program

(ETIP) as part of its evaluation of a Federal Supply Service (FSS) procurement of ranges. Survey questions were designed to obtain manufacturers'

views on the use of Government procurement policies to increase the rate of

introduction of new technologies into the consumer marketplace. The

questions covered the following areas: (1) reasons for participation or

non-participation of a manufacturer in the ETIP experiment; (2) problems

a manufacturer encounters with existing Federal procurement practices;

(3) acceptability of using life-cycle costing in the bidding procedure;

and (4) effect of the most recent Government procurement on present and

future carpany operations. Results of the siarvey are reported, and

implications are drawn for future ETIP studies of Government procuronent

activities

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

)

Energy-efficient products; Experimental Technology Incentives Program;

gas and electric ranges; life-cycle costing; prociirement experiments.

18. AVAILABILITY

^ Unlimited

I

! For Official Distribution. Do Not Release to NTIS

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

I Order From National Technical Information Service (NTIS)

Springfield, Virginia 22151

19. SECURITY CLASS

(THIS REPORT)

is

UNCL ASSIFIED

20. SECURITY CLASS

(THIS PAGE)

is

UNCLASSIFIED

21. NO. OF PAGES

31

22. Price

$4.00

USCOMM-DC 29042-P74