United States General Accounting Office

GAO Report to Congressional Committees

and Acting Administrator, Office of

Federal Procurement Policy

September 1997 ACQUISITION

REFORM

Classes of Contracts

Not Suitable for the

Federal Acquisition

Computer Network

GAO/NSIAD-97-232

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-276449 

September 17, 1997

Congressional Committees and

Acting Administrator, Office of Federal Procurement Policy

The Federal Acquisition Streamlining Act of 1994 (FASA), Public 

Law 103-355, mandated a governmentwide Federal Acquisition Computer

Network (FACNET) architecture to enable federal agencies and vendors to

do business electronically in a standard way and move the government’s

procurement process away from paper. It was expected that FACNET would

be used for most competitive contract awards valued above the

micro-purchase threshold of $2,500, up to the simplified acquisition

threshold of $100,000. Procurements in this range are simplified

acquisitions that may be conducted using procedures that are less

complex than those required for full and open competitive acquisitions. In

January 1997, we reported numerous concerns about FACNET

implementation, including FASA’s requirements.1 Legislation has been

introduced to amend the FASA requirements to allow electronic commerce

(EC) to be implemented in a more flexible manner.

This letter responds to the FASA requirement that we report on “the classes

of contracts2

 in amounts greater than the micro-purchase threshold and

not greater than the simplified acquisition threshold that are not suitable

for acquisition through a system with full FACNET capability.” Specifically,

we ascertained characteristics of contract actions that agencies found not

suitable for FACNET processing and evaluated the reasonableness and

consistency of agencies’ explanations why they were unsuitable for

FACNET. In addition, we analyzed governmentwide EC statistics to

determine agencies’ use of FACNET and other EC purchasing methods. We

obtained information from senior procurement officials at 24 federal

agencies. (A list of the responding agencies is in app. I.)

Background FACNET is a governmentwide systems architecture for acquisition based on

electronic data interchange (EDI), which is the computer-to-computer

exchange of routine business documents using standardized data formats.

A key goal of FACNET and the governmentwide EC program is to present a

“single face to industry”—making the government look like a single entity

1

Acquisition Reform: Obstacles to Implementing the Federal Acquisition Computer Network

(GAO/NSIAD-97-26, Jan. 3, 1997).

2

For this report, “class of contracts” means a group of contracts that bears some common

characteristic(s), for example, a category or subcategory of products or services. Another example is

contract awards above or below some dollar amount or within a specified dollar range.

Page 1 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

rather than a collection of independent departments and agencies. The EC

program aims to simplify and standardize doing business by eliminating

the need to deal with numerous different agencies’ procurement

processes, forms, and rules.

FASA requires that agencies award at least 75 percent of eligible contracts

through a system that has implemented all the FACNET functions.3

Contracting offices in agencies that are not in compliance by December 31,

1999, will lose their authority to use simplified acquisition procedures for

contracts exceeding $50,000.

Agencies can exclude certain contract actions when calculating the

percentage of FACNET use:4

• The Federal Acquisition Regulatory (FAR) Council has determined that

certain contract actions, such as delivery orders, task orders, and in-scope

modifications against established contracts, should not be considered

when determining agency compliance with FASA’s 75-percent criterion.5

Essentially, this means that only contract awards should be counted.6

• FASA authorizes the head of each executive agency to exempt its procuring

activities (or portions thereof) from the requirement to implement full

FACNET capability based on a determination that such implementation is

not cost-effective or practicable. Contracts awarded by exempted

activities are not to be considered in determining agency compliance with

the criterion.

• FASA provides that the FAR Council may determine—after considering our

report on this subject—that classes of contracts are not suitable for

acquisition through a system with full FACNET capability.

In our January 1997 report, we questioned the FASA-mandated approach to

EC. Also, we observed that since passage of FASA, alternative electronic

3

The functions include allowing an agency to electronically (1) provide widespread public notice of

solicitations for contracting opportunities issued by the agency; (2) receive responses to solicitations

and associated requests for information; (3) provide public notice of contract awards (including price);

(4) receive questions regarding solicitations, where practicable; (5) issue orders, where practicable;

(6) make payments to contractors, where practicable; and (7) archive data relating to each

procurement action made using such system.

4

FASA defines a contract as eligible if it is not in any class of contracts determined by the FAR Council

to be unsuitable for acquisition through a system with full FACNET capability.

5

See FAR Part 4.505-4.

6

Contract awards include new definitive contracts, new purchase orders, initial letter contracts, and

orders under basic ordering agreements but exclude delivery orders, task orders, and in-scope

modifications that have been issued against established contracts.

Page 2 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

purchasing methods had become readily available to the government and

its vendors. Given these alternative methods, the prescriptive

requirements of FASA, and problems with implementation, we questioned

the extent to which FACNET made good business sense for simplified

acquisitions. We recommended that the executive branch (1) develop a

coherent EC strategy and implementation approach incorporating the

single-face-to-industry goal and (2) seek legislative changes, if FASA’s

requirements for FACNET were an impediment to implementing the

governmentwide EC strategy.

Since then, the President’s Management Council has tasked a high-level

management committee to review EC implementation and develop a more

integrated federal EC strategy. The executive branch also recently

proposed legislative changes to repeal mandated use of FACNET. On July 8,

1997, the Senate approved an amendment to the Fiscal Year 1998 National

Defense Authorization Bill that would, among other things (1) repeal

mandated use of FACNET; (2) define EC to include electronic mail or

messaging, World Wide Web technology, electronic bulletin boards,

purchase cards, electronic funds transfer, and EDI; and (3) ensure that any

notices of agency requirements or solicitation for contract opportunities

are provided in a form that allows convenient and universal user access

through a single governmentwide point of entry. The amendment calls for

uniformity in federal EC implementation to the maximum extent that is

practicable. The House National Defense Authorization Bill did not

contain any language regarding FACNET. Therefore, the Senate amendment

will be addressed in conference. This report provides information that

could be useful in congressional deliberations.

Results in Brief Senior procurement officials generally found contracts unsuitable for

FACNET when (1) widespread public solicitation of offers was

inappropriate, (2) transmitting essential contracting information through

the network was not practical or feasible, or (3) alternative purchasing

methods were faster and more efficient. The agencies provided clear,

reasonable, and consistent business and technical reasons why numerous

types of contracts should be excluded from mandatory FACNET processing.

Available data showed continuing limited use of FACNET for contract

awards. However, there is no governmentwide data available on agencies’

use of other EC purchasing methods. Consequently, it is difficult to assess

the government’s overall progress in doing business electronically in a

Page 3 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

standard way. Governmentwide EC statistical information may not be

available until the year 2000.

Agencies Found

Several Contract

Types Not Suitable for

FACNET

Responses from 24 agencies indicated a general consensus among senior

federal procurement officials that, for several types of contracts, the use of

FACNET is inappropriate, impractical, or inefficient. As discussed below, the

agencies provided clear, reasonable, and consistent reasons for excluding

contracts from mandatory FACNET processing.

Contracts for Which

Widespread Public

Solicitation Is

Inappropriate

A primary function of FACNET, mandated by FASA, is to enable agencies to

provide widespread electronic public notice of solicitations for

contracting opportunities.7

 Several agencies’ senior procurement officials

identified procurements for which nationwide public solicitation of offers

was inappropriate or ineffective in filling requirements. These officials

considered such procurements unsuitable for acquisition through FACNET.

A major group of contracts in this category is procurements with “on-site”

or local vendor requirements that generally require soliciting competition

from vendors in a local area. Construction and building maintenance

services contracts, for example, typically require a site visit to understand

the work to be performed, examine conditions affecting the work, and

accurately estimate the cost of performance. One agency cited its

requirement for weed control services as a typical example of a contract

that requires a local presence by vendors to bid intelligently and keep

costs down for acceptable performance. Another agency noted that

purchases of subsistence items are limited to the local commuting area

because they require the buyer to view and select the commodities.

According to procurement officials, nationwide solicitation through

FACNET for procurements with “on-site” or local commuting area

requirements was often inappropriate because vendors from outside the

area could not reasonably be expected to be able to fulfill the requirement,

resulting in additional costs to prepare and evaluate offers with no

commensurate benefit to vendors or the agency.

Widespread public notice may not be required or appropriate for other

types of contracts. For example, agencies’ officials noted that awards to

Small Disadvantaged Business Concerns, referred to as 8(a) contractors,

do not use public solicitation of offers.

7

Generally, non-FACNET procurements in excess of $25,000 must be advertised in the Commerce

Business Daily. See FAR Part 5.101.

Page 4 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

Transmission of Essential

Contract Information Is

Impractical or Infeasible

Senior procurement officials found FACNET unsuitable for numerous

contracts because essential procurement information could not be sent,

received, or communicated effectively through FACNET. In particular,

senior procurement officials considered FACNET inappropriate for

procurements requiring extensive government specifications, lengthy

written or oral proposals, sensitive or classified information, technical

evaluations, and urgent delivery or performance. For example, contracts

for various services, such as research and development efforts, were cited

frequently because of the lengthy statements of work and other

attachments that were often required. According to procurement officials,

transmitting such information through FACNET is difficult, costly, and often

infeasible.8

 The Department of Defense (DOD) is working with the National

Technical Information Service to address this issue by developing methods

for making drawings, specifications, and standards cited in government

solicitations available electronically. According to DOD officials, early

results of this program appear promising.

Several procurement officials indicated that procurements involving

sensitive information are not suitable for FACNET processing because, in

their view, FACNET does not currently provide adequate security.9

Additionally, acquisitions that require urgent delivery of a service or

material are not considered good candidates for FACNET because

procurements that are conducted through FACNET would take too long to

complete.

Procurement officials also cited several types of acquisitions that could

not be conducted through FACNET because vendors were not on FACNET.

For example, for some procurements with on-site or local commuting area

requirements, agencies’ officials indicated that there were few or no local

vendors participating in FACNET. Several agencies’ officials considered

FACNET impractical for overseas procurements, especially in developing

countries because vendors did not have the technical sophistication or

infrastructure to sell via FACNET. Likewise, some procurement officials said

it is unreasonable to expect individuals and noncommercial organizations

to be on FACNET since they are not set up to sell products or services on a

8

The policy for FACNET use outlined in FAR Part 4.502 states that contracting officers may

supplement FACNET transactions by using other media to meet the requirements of any contract

action (e.g., transmit hard copy of drawings).

9

FAR Part 4.502(b) states that before using FACNET or any other method of EDI, the agency head shall

ensure that the EDI system is capable of ensuring authentication and confidentiality commensurate

with the risk and magnitude of the harm from loss, misuse, or unauthorized access to or modification

of the information.

Page 5 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

frequent basis and investing in FACNET for a few orders was not considered

cost-effective.

Alternative Purchasing

Methods Are More

Efficient

Procurement officials from several agencies considered FACNET unsuitable

if they found other purchasing methods or EC technologies to be more

efficient, less costly, and easier to use. For example, procurement officials

noted a number of alternative purchasing methods they considered more

economical and easier to use than FACNET. These methods included

purchase card procurements and orders placed against electronic catalogs

and existing contracts, such as General Services Administration (GSA)

supply schedules, GSA Advantage,10 and governmentwide indefinite

delivery/indefinite quantity contracts. Several procurement officials stated

that the Internet and Web-based technologies are better EC options than

FACNET because they are easier to access, have fewer technical limitations,

and are relatively inexpensive for agencies and contractors to implement

and use.

Procurement officials also said that it was generally less expensive and

quicker to purchase commercial products and services valued under

$25,000 locally using traditional oral and paper-based solicitation methods

rather than FACNET when sufficient competition was available. One official

noted that for actions between $2,500 and $10,000, which do not require

“posting” notices of solicitations, contracting offices without FACNET

capability processed these procurements in a few days using locally

available suppliers with good past performance records; FACNET capable

sites were not able to meet their customers’ needs in the same time

frames.

Little Information

Reported on Agencies’

EC Transactions

Available data shows limited and declining use of FACNET for contract

awards. However, the lack of governmentwide data on agencies’ use of

other EC purchasing methods, such as purchase cards and orders placed

electronically against catalogs and indefinite delivery/indefinite quantity

contracts, impedes efforts to assess the government’s progress in moving

toward doing business electronically and achieving the “single face to

industry” goal.

In our earlier report, we estimated that in 1995, less than 2 percent of

about 2 million federal procurement actions above the micro-purchase

10GSA Advantage is an on-line ordering system that allows agencies to search through all GSA sources

of supply and select the item that is the best value for their requirements.

Page 6 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

threshold and below the simplified acquisition threshold ($2,501 and

$100,000) were made through FACNET. The most recent and readily

available data from the EC Program Office (January through

June 1997) indicated that the volume of procurement actions processed

through FACNET had declined, when compared to the same period a year

earlier.11

On December 23, 1996, the Administrator for Federal Procurement Policy

notified agency senior procurement executives that the EC concept for

procurement had been broadened to include orders placed electronically

against electronic catalogs and indefinite delivery/indefinite quantity

contracts, purchase cards use, FACNET transactions, and Web-based

contacting actions and requested agencies to report monthly the number

and dollar value of EC transactions in each of these categories.12

The Administrator’s memorandum stated that it is difficult to measure the

impact of EC without adequate data. Also, vendors have pointed out that

they need information on the volume and value of federal EC purchases to

determine whether there are sufficient business opportunities to justify

the investments needed to participate. The limited governmentwide EC

statistics are posted for public access on the Internet. As of July 25, 1997,

only 6 of 21 agencies had submitted monthly statistics on the number and

value of their agencies’ FACNET solicitations and orders for January through

June 1997. Five of these six agencies also reported data on other EC

procurements. Four of the 21 agencies had not reported EC statistics. Thus,

no governmentwide data is currently available on the volume and value of

all EC procurements. Both GSA and the Office of Federal Procurement

Policy commented that they are modifying the Federal Procurement Data

System to collect EC statistical information and it may not be available

until the year 2000.

Conclusions Senior procurement executives identified several classes of contracts not

suitable for FACNET. These were contracts where (1) widespread

solicitation is inappropriate, (2) transmission of essential information

through FACNET is impracticable or infeasible, or (3) alternative

procurement methods, including other EC methods, are more efficient.

11Complete governmentwide data is not available; however, DOD, which accounted for over 73 percent

of all reported FACNET procurement actions in 1996, does report complete data that was used for this

comparison. DOD officials told us the volume of FACNET procurements reported for 1996 dropped as

a result of a systems software enhancement, which eliminated the counting of redundant transactions

and other anomalies.

12The monthly statistics can be reported to the EC Program Office quarterly.

Page 7 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

They provided clear, reasonable, and consistent business and technical

reasons to support their positions. The most recent available data shows

that FACNET use has declined since last year. However, comprehensive

information is not available on the volume and value of other federal EC

procurements.

We believe the information in this report further supports our earlier work

that showed the government needs the flexibility to implement EC

technologies and purchasing methods that make good business sense and

are aligned with commercial applications. It also supports our earlier

recommendation to develop a coherent and integrated federal strategy and

implementation approach for using various EC technologies and

purchasing methods to meet agencies’ acquisition needs. That strategy and

implementation approach remain to be completed.

Scope and

Methodology

To address our objectives, we asked the Senior Procurement Executives at

25 federal agencies to give us information and explanations about

(1) contracts they identified as not suitable for acquisition through FACNET

and (2) the extent to which their agencies’ competitive contract awards

between $2,500 and $100,000 were generally suitable for acquisition

through a system with full FACNET capability. We received responses from

24 agencies. We also interviewed senior officials at the Office of Federal

Procurement Policy, DOD, and GSA responsible for the governmentwide EC

program.

In addition, to assess federal agencies’ use of FACNET and other EC

purchasing methods, we reviewed data on FACNET transactions from DOD’s

Life-Cycle Information Integration Office and EC statistics submitted by

federal agencies to the EC Program Office in GSA from January 1996

through June 1997. We did not independently verify the data.

We performed our work between January and August 1997 in accordance

with generally accepted government auditing standards.

Agency Comments In commenting on a draft of this report, DOD, the National Aeronautics and

Space Administration (NASA), GSA, and the Office of Federal Procurement

Policy generally agreed with our findings.

DOD stated that FACNET use will continue, even if a current congressional

amendment repeals its mandated use. DOD noted that it is incorporating EC

Page 8 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

into its business practices within the simplified acquisition threshold. DOD

believes agencies’ procurement officials should be allowed to determine

for their agencies those classes of contracts not suitable for FACNET.

NASA stated that it advocates a strategy that recognizes the variety of users,

situations, and transaction types and moves to match them with the

appropriate EC technology. NASA noted that the challenge remains to offer

alternatives to agencies and their end users that provide attractive and

cost-effective reasons for moving forward from a non-EC environment.

NASA stated that it is working with other agencies committed to developing

a coherent strategy and implementation approach that takes advantage of

the Internet, including moving toward a “single face” environment for

advertising business opportunities.

Both GSA and the Office of Federal Procurement Policy expressed concern

about the lack of comprehensive EC data. GSA stated that for the past 

2 years the Electronic Commerce Program Office had been requesting

monthly data from agencies on their FACNET and non-FACNET EC activities

and, as the draft report noted, the response had not been good. GSA

indicated that it had recommended to the Office of Federal Procurement

Policy that EC statistical information be collected as part of the overall

procurement data collection done through the Federal Procurement Data

System. The Office of Federal Procurement Policy stated that to ensure

more accurate and timely data on EC activities, it planned to modify the

Federal Procurement Data System to collect EC statistical information. The

Office of Federal Procurement Policy and GSA are working to get the

change incorporated into the Federal Procurement Data System by fiscal

year 1999.

NASA’s comments are reprinted in their entirety in appendix II. DOD, GSA,

and the Office of Federal Procurement Policy provided oral comments.

Agency suggestions to improve the technical accuracy of the report have

been incorporated in the text where appropriate.

We are sending copies of this report to the Director, Office of Management

and Budget; the Secretary of Defense; the Administrators for GSA and NASA;

and other officials at the agencies included in our review. Copies will also

be made available to others upon request.

Page 9 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

Please contact me at (202) 512-4587 if you or your staff have any questions

concerning this report. Major contributors to this report are listed in

appendix III.

Louis J. Rodrigues

Director, Defense Acquisition Issues

Page 10 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

List of Congressional Committees and the Acting Administrator, Office of

Federal Procurement Policy

The Honorable Fred Thompson

Chairman

The Honorable John Glenn

Ranking Minority Member

Committee on Governmental Affairs

United States Senate

The Honorable Strom Thurmond

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Christopher Bond

Chairman

The Honorable John Kerry

Ranking Minority Member

Committee on Small Business

United States Senate

The Honorable Dan Burton

Chairman

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform and Oversight

House of Representatives

The Honorable Floyd Spence

Chairman

The Honorable Ronald V. Dellums

Ranking Minority Member

Committee on National Security

House of Representatives

Page 11 GAO/NSIAD-97-232 Acquisition Reform
B-276449 

The Honorable James Talent

Chairman

The Honorable John J. LaFalce

Ranking Minority Member

Committee on Small Business

House of Representatives

The Honorable Allan E. Brown

Acting Administrator

Office of Federal Procurement Policy

Page 12 GAO/NSIAD-97-232 Acquisition Reform
Page 13 GAO/NSIAD-97-232 Acquisition Reform
Contents

Letter 1

Appendix I 

List of Responding

Agencies

16

Appendix II 

Comments From the

National Aeronautics

and Space

Administration

17

Appendix III 

Major Contributors to

This Report

18

Abbreviations

DOD The Department of Defense

EC electronic commerce

EDI electronic data interchange

FACNET Federal Acquisition Computer Network

FAR Federal Acquisition Regulation

FASA The Federal Acquisition Streamlining Act of 1994

GSA General Services Administration

NASA National Aeronautics and Space Administration

Page 14 GAO/NSIAD-97-232 Acquisition Reform
Page 15 GAO/NSIAD-97-232 Acquisition Reform
Appendix I 

List of Responding Agencies

Department of Agriculture

Department of the Air Force

Department of the Army

Department of Commerce

Department of Defense

Department of Education

Department of Energy

Department of Health and Human Services

Department of Housing and Urban Development

Department of the Interior

Department of Justice

Department of Labor

Department of the Navy

Department of State

Department of Transportation

Department of the Treasury

Department of Veterans Affairs

Agency for International Development

Defense Logistics Agency

Environmental Protection Agency

General Services Administration

National Aeronautics and Space Administration

Office of Personnel Management

Small Business Administration

Page 16 GAO/NSIAD-97-232 Acquisition Reform
Appendix II 

Comments From the National Aeronautics

and Space Administration

Page 17 GAO/NSIAD-97-232 Acquisition Reform
Appendix III 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Kevin M. Tansey

Patricia D. Slocum

Russell R. Reiter

Office of General

Counsel, Washington,

D.C.

John A. Carter

(707231) Page 18 GAO/NSIAD-97-232 Acquisition Reform
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