a

GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on Technology and Procurement Policy, 

Committee on Government Reform, 

House of Representatives

March 2002 DESKTOP 

OUTSOURCING

Positive Results 

Reported, but 

Analyses Could Be 

Strengthened

GAO-02-329
Why GAO Did This Study

Since 1997, federal agencies have

been engaging in an informationtechnology outsourcing approach

for acquiring services in support

of their desktop computing

environment from a single

source, generally known as “seat

management.” Among its

objectives, GAO was asked to

determine whether six agencies

involved in seat management

have realized expected costs and

benefits and to identify lessons

learned. GAO selected agencies

that used various contract

vehicles and had at least 1 year of

experience with the contract.

March 2002

DESKTOP OUTSOURCING

Positive Results Reported, but Analyses

Could Be Strengthened

This is a test for developing highlights for a GAO report. This full report, including GAO’s objectives, scope, methodology, and analysis is available

at www.gao.gov/cgi-bin/getrpt?GAO-02-329. For additional information about this report, contact David McClure (202-512-6257). To provide comments on

this test highlights, contact Keith Fultz (202-512-3200) or e-mail HighlightsTest@gao.gov.

Highlights of GAO-02-329, a report to the Chairman, Subcommittee on Technology and Procurement

Policy, Committee on Government Reform, House of Representatives.

What GAO Recommends

So that the six agencies reviewed

can determine the extent to which

their current seat management

programs are achieving positive

results, GAO recommends that

they monitor actual seat

management costs and benefits.

Also, to help ensure that future

seat management investments of

these six agencies are justified,

GAO recommends that when

considering such investments,

these agencies analyze expected

costs and benefits and, to the

extent feasible, implement the

lessons learned in this report.

Of the six agencies that

commented on a draft of this

report, three agreed with its

findings or recommendations, two

did not indicate whether they

agreed or disagreed, and one

supported many of the findings,

but disagreed with portions of the

report.

United States General Accounting Office

What GAO Found

Although the six agencies reviewed reported various positive results

from implementing seat management, GAO could not determine whether

they were achieving expected costs and benefits because they did not

perform sufficient up-front analyses or routinely monitor actual results.

All were tracking elements of contractor performance, such as user

satisfaction. Although not a substitute for determining whether the

benefits of seat management outweigh its costs and risks, this tracking

provides an indication of whether expected services are being provided.

Positive results that these agencies reported can be categorized into four

general areas: improving information technology management (e.g., using

a standard technology environment to eliminate incompatible hardware

and software and improve information sharing across an agency);

improving end-user support, such as help-desk support; enhancing

mission support (e.g., staff were freed from desktop management duties

to perform other mission-related duties); and more timely upgrading of

technology.

However, these agencies performed limited or, in some cases, no

analyses of expected costs and benefits before implementing seat

management and did not routinely monitor all actual costs or benefits.

These agencies and other organizations consider up-front analyses and

subsequent program management critical practices for a successful

implementation and have identified various lessons learned from their

experiences that would benefit other agencies considering future seat

management investments (see list below).

Lessons Learned

Agencies can reduce the risk of an unsuccessful implementation by

! obtaining agency commitment, especially by top management;

! completing thorough up-front preparation and planning activities;

! carefully managing solicitation and contract award activities;

! developing strong program and contract management activities, including monitoring

contractor performance;

! developing partnerships between agencies and the seat management contractors in

which they work toward establishing and achieving common goals; and

! establishing effective and continual communication within the agency, with the seat

management contractor, and among contractors working on related activities.

G A O

Accountability Integrity Reliability

Highlights
Page i GAO-02-329 Desktop Outsourcing

Contents

Letter 1

Results in Brief 2

Background 5

Rationales for Adopting Seat Management Varied 9

Agencies Reported Positive Seat Management Results, 

but Costs and Benefits Were Not Adequately Assessed and 

Monitored 11

Risks Were Identified, but Analyses Were Incomplete 

or Not Timely 19

Lessons Learned Can Help Other Agencies More Effectively 

Implement Seat Management 22

Conclusions 35

Recommendations 35

Agency Comments and Our Evaluation 36

Appendixes

Appendix I: Information on Seat Management Contracts as 

of December 31, 2001, Awarded under the NASA ODIN 

Master Contract 39

Appendix II: Information on Seat Management Contracts as

of December 31, 2001, Awarded under the GSA Seat 

Management Master Contract 42

Appendix III: Scope and Methodology 45

Appendix IV: Comments from the Department of the Treasury’s 

Departmental Offices 47

Appendix V: Comments from the Bureau of Alcohol, Tobacco and 

Firearms 50

Appendix VI: Comments from the Peace Corps 51

Appendix VII: Comments from the Department of Defense 54

Appendix VIII: Comments from the General Services Administration 57

Appendix IX: Comments from the National Aeronautics and Space 

Administration 58

GAO Comments 60

Appendix X: GAO Contact and Staff Acknowledgments 62

GAO Contact 62

Acknowledgments 62
Contents

Page ii GAO-02-329 Desktop Outsourcing

Table Table 1: Types of Seat Management Services and Cost Data for 

Agencies We Reviewed 7

Abbreviations

ATF Bureau of Alcohol, Tobacco and Firearms

CIO chief information officer

CMS Centers for Medicare and Medicaid Services

DLA Defense Logistics Agency

FSS Federal Supply Service

GSA General Services Administration

IT information technology

NASA National Aeronautics and Space Administration

ODIN Outsourcing Desktop Initiative for NASA

OMB Office of Management and Budget
Page 1 GAO-02-329 Desktop Outsourcing

United States General Accounting Office

Washington, D.C. 20548

A

March 29, 2002 Letr

The Honorable Tom Davis

Chairman, Subcommittee on Technology

and Procurement Policy

Committee on Government Reform

House of Representatives

Dear Mr. Chairman: 

This letter responds to your request that we review federal agencies’ efforts 

to engage in an information technology (IT) outsourcing1

 alternative for 

acquiring distributed computing services (typically those pertaining to 

desktop management) known as “seat management.” Generally speaking, 

under seat management, contractor-owned desktop and other computing 

hardware, software, and related services are bundled and provided on the 

basis of a fixed price per unit (or seat). Since the Department of the 

Treasury’s Bureau of Alcohol, Tobacco and Firearms (ATF) pioneered the 

use of seat management in the federal government in 1997, more than a 

dozen other federal entities have contracted for seat management services, 

and still others are considering this approach.

Because more agencies have begun to use the seat management concept, 

you expressed interest in identifying how well this approach has worked at 

different entities. Accordingly, our objectives were to (1) determine 

agencies’ rationales for awarding seat management contracts,2

 (2) assess 

whether estimated costs and benefits have been achieved, (3) ascertain 

how well agencies have managed the risks associated with seat 

management, and (4) identify lessons learned. 

1

IT outsourcing describes the activities associated with acquiring IT services from one or 

more external providers. During outsourcing, a client organization transfers responsibility 

for one or more IT services to one or more external providers. This responsibility is 

executed by controlling and managing the processes, people, and technology associated 

with these services. 

2

The agencies in our review used various governmentwide contracts to implement seat 

management. As such, they generally did not enter into contracts with the seat management 

vendors; instead, they used task orders, delivery orders, or blanket purchase agreements, 

which were placed against existing contracts. For the purposes of this report, however, we 

will refer to such acquisition documents as contracts.
Page 2 GAO-02-329 Desktop Outsourcing

In addition to the primary objectives, you also asked that we identify the 

agencies using the National Aeronautics and Space Administration’s 

(NASA) and the General Services Administration’s (GSA) seat-management 

governmentwide acquisition contracts. For the agencies using these 

contracts, you asked that we identify (1) the types of services for which the 

agencies contracted and (2) the expected costs and benefits associated 

with these services. We are providing this information in appendixes I and 

II for the NASA and GSA governmentwide seat management contracts, 

respectively.

To determine agencies’ rationales for using seat management, estimated 

and actual costs and benefits, and risk management analyses, we reviewed 

how seat management was implemented at six agencies: NASA, the Centers 

for Medicare and Medicaid Services (CMS), Treasury’s Departmental 

Offices and ATF, the Peace Corps, and the Defense Logistics Agency (DLA). 

We chose these agencies because they (1) used a variety of contracting 

vehicles, (2) had seat management contracts that had been awarded more 

than 1 year before our review, and (3) had at least 500 seats. 

We reviewed the agencies’ seat management contracts, analyses of costs 

and benefits, processes to monitor contractor performance, risk analyses, 

and other related documents. To obtain information on lessons learned, we 

interviewed officials from the six agencies and reviewed applicable 

documentation. We also interviewed officials from private-sector 

organizations, including the seat management contractors for the six 

agencies in our review, and reviewed research on seat management and 

distributed computer outsourcing published by private research firms. In 

addition, we interviewed and obtained applicable lessons learned and other 

documentation from GSA because it (1) manages one of the 

governmentwide seat management contracts and (2) abandoned an 

attempt to implement seat management internally in late 2001. Appendix III 

provides more information on our scope and methodology. 

Results in Brief No single overarching reason emerged regarding why agencies decided to 

adopt seat management to address their distributed computing needs. 

Instead, the six agencies in our review adopted seat management for a 

variety of reasons. The most common rationales pertained to improving IT 

management, improving user support and productivity, and obtaining or 

upgrading agency IT. While acknowledging the importance of cost 

considerations in making the seat management decisions, agency officials 
Page 3 GAO-02-329 Desktop Outsourcing

generally stated that lowering the cost of their existing services was not 

their primary reason for choosing this approach. 

All agencies in our review reported that their seat management approaches 

had achieved positive results, such as improving IT management (e.g., 

using one standard technology environment to eliminate incompatible 

hardware and software and improve information sharing across an agency) 

and improving end-user support, such as help-desk support. However, we 

could not determine whether any of the agencies were achieving expected 

costs and benefits because they did not (1) perform sufficient up-front 

analyses of their baseline and projected costs and benefits and (2) routinely 

monitor all actual seat management costs and benefits. To their credit, all 

six agencies tracked contractor performance against specific performance 

metrics in their contracts in areas such as service delivery and availability. 

While this type of tracking can be an indicator of whether certain types of 

goals are being achieved, such as improved user satisfaction, such metrics 

do not fully address whether the overall cost and benefit goals of seat 

management programs are being met. 

Like any important IT effort, it is critical that agencies consider the risks 

associated with seat management before adopting this approach, as noted 

by the Office of Management and Budget (OMB) and our guidance. Four of 

the agencies in our review identified risks associated with seat 

management, such as possible cost overruns, schedule delays, or 

contractor performance problems. However, of these four agencies, none 

ranked their risks in order of priority, and only one identified actions to 

mitigate risks before implementing seat management. In addition, two 

agencies did not perform an analysis of risks at all. One area in which 

agencies effectively addressed a critical risk was by executing contracts 

that contained adequate clauses to protect the government in areas such as 

quality assurance and termination rights.

By applying the lessons learned by agencies that have implemented seat 

management initiatives, agencies considering this approach could more 

effectively plan their activities and reduce the risk of encountering 

problems experienced by others. Agencies and seat management 

contractors have identified important lessons learned from their 

implementation experiences, namely that,

• agency commitment is crucial, especially by top management;
Page 4 GAO-02-329 Desktop Outsourcing

• thorough up-front preparation and planning activities must be 

completed;

• solicitation and contract award activities should be carefully managed;

• program and contract management activities, including monitoring 

contractor performance, are key; 

• partnerships between agencies and the seat management contractors, in 

which they work toward establishing and achieving common goals, are 

critical; and

• effective and continual communication within the agency, with the seat 

management contractor, and among contractors working on related 

activities, is important. 

So that agencies can determine the extent to which their current seat 

management programs have achieved positive results, we are 

recommending that each of the six agencies in our review monitor all 

actual seat management costs and benefits. Also, to ensure that the future 

seat management investments of these agencies are justified, we are 

recommending that they establish a baseline for current costs; perform an 

analysis of expected costs, benefits, and risks; and consider implementing 

the lessons learned identified in this report.

In providing written comments on a draft of this report, three agencies 

agreed with our findings or recommendations; two did not indicate 

whether they agreed or disagreed; and NASA, while supporting many of the 

findings, disagreed with portions of the report. Specifically, NASA did not 

agree with our assessment that its up-front cost analysis was not sufficient, 

that it did not track its internal seat management costs, and that it did not 

adequately track benefits. As discussed in this report, (1) an analysis 

conducted by a consulting firm concluded that NASA lacked a 

comprehensive baseline of its pre-seat-management costs; (2) NASA 

tracked contractor costs and the number of internal staff involved with seat 

management; however, the agency did not fully track other internal costs, 

such as overhead; and (3) NASA tracked contractor performance, which 

addresses certain expected benefits, but it did not fully monitor others, 

such as potential increases in user efficiency and productivity. As such, 

NASA lacks a full picture and analysis of its seat management program. 
Page 5 GAO-02-329 Desktop Outsourcing

Background Although there is no generally accepted definition of seat management, at 

its core, it involves using a performance-based contract3

 to obtain 

equipment, software, and services from a private-sector firm to meet an 

agency’s distributed computing requirements (typically pertaining to 

desktop equipment). Agencies are charged on a per-seat basis for the 

services provided,4

 but what constitutes a “seat” can vary substantially in 

terms of the type of equipment and type and level of service provided. For 

example, a seat can consist of a single type of service sold at a fixed price 

per unit or as a bundle of different services which, taken together, are also 

sold at a fixed price. These different views of seat management account, in 

part, for the different contracting vehicles for seat management in the 

government. Nevertheless, in its purest form, seat management turns 

personal computer resources into a utility or commodity in which the 

customer purchases the right to use the vendor’s equipment and resources. 

The vendor remains the owner of the equipment5

 and is ultimately 

responsible for its upkeep. 

According to Gartner, Inc., a leading private research firm, 1996 to 1998 saw 

a growth trend in publicly reported desktop-management outsourcing 

contracts in the private sector.6

 Leading organizations have identified both 

business- and technology-based reasons for outsourcing IT services. 

Business-based reasons included being able to (1) focus resources on core 

business competencies by transferring responsibility for IT services to an 

external provider and (2) respond more quickly to business and industry 

changes by leveraging the experience of an external provider. Technologybased reasons for outsourcing included (1) gaining quicker access to 

technology skills that are in high demand, (2) acquiring the flexibility to 

grow and shrink high-technology skills as needed, (3) gaining access to 

enhanced hardware and software, (4) acquiring the ability to refresh 

hardware and software as needed, (5) aggregating the demand for IT 

3

Performance-based service contracting is a process in which the customer agency specifies 

the outcome or result it desires and leaves it to the vendor to decide how best to achieve the 

desired outcome. 

4

In some cases, agencies used their seat management contract to obtain other IT services 

that were not charged on a per-seat basis. 

5

In at least one instance, an agency chose to retain ownership of the assets obtained through 

its seat management contract. 

6

Gartner, Inc., Trends in Desktop Management Outsourcing Contracts, 1996-1998 (March 

8, 1999). 
Page 6 GAO-02-329 Desktop Outsourcing

resources from across the organization, and (6) achieving a more 

standardized IT environment.

A similar growth in IT service contracts occurred in the federal 

government. Specifically, the government’s purchases of IT services have 

increased from $3.7 billion in fiscal year 1990 to about $13.4 billion in fiscal 

year 2000. In the case of distributed computing services outsourcing, ATF is 

generally acknowledged as the pioneering federal agency in implementing 

seat management since it initially outsourced its desktop and network 

services in late 1997. In mid-1998, NASA and GSA awarded 

governmentwide seat-management indefinite-delivery, indefinite-quantity 

contracts. First, in June 1998, NASA awarded contracts to seven prime 

contractors under its Outsourcing Desktop Initiative for NASA (ODIN) 

governmentwide contract. The next month, GSA awarded contracts to 

eight prime contractors under its GSA seat management contract. As of 

December 31, 2001, two agencies were using the NASA ODIN contract, and 

eight agencies were using the GSA seat management contract (see apps. I 

and II for additional information about these agencies). In addition, some 

agencies are using GSA’s Federal Supply Service (FSS) Schedule 70 

contracts7

 to obtain seat management services or have developed and 

managed their own seat management contracts.

Table 1 illustrates the different seat management approaches taken by the 

six agencies in our review, categorized by the contract vehicle used by 

each.

7

Under the schedule program, GSA enters into indefinite-delivery, indefinite-quantity 

contracts with commercial firms to provide commercial goods and services 

governmentwide. Schedule 70 contains contracts related to general-purpose commercial IT 

equipment, software, and services.
Page 7 GAO-02-329 Desktop Outsourcing

Table 1: Types of Seat Management Services and Cost Data for Agencies We Reviewed

Contract/ 

Agency

Date of 

contract

awarda

Contract 

term 

Number and types of seat 

management services acquired, as of 

July 31, 2001

Reported actual

contract costs,

as of

July 31, 2001 Comments

GSA’s seat management master contract 

Peace Corps April 2000 3-year base 

period, with 

two 1-year 

option 

periods

683 general-purpose desktop seats

171 portable computer seats

31 server seats

127 network printer seats

39 communication device seats 

Additional services include off-site tape 

storage and application program 

development support.

$7,564,396 Under the terms of the 

master GSA seat 

management contract, 

infrastructure 

management (e.g., 

network 

management); user 

support (e.g., help 

desks); and asset 

management services 

are bundled as a part 

of a seat.

Treasury’s

Departmental 

Offices

June 1999 1-year base 

period, with 

nine 1-year 

option 

periods 

First two 

options 

exercised

1,642 desktop seats

700 portable computer seats

(other equipment, such as servers, 

printers, and routers, are included in the 

price of these seats)

Additional services include 

voice/telephone administration, Web-site 

support, training, fax support, personal 

digital assistant support, and the 

establishment of a classified network.

26,678,415 Same as above.
Page 8 GAO-02-329 Desktop Outsourcing

NASA’s ODIN master contract

NASA’s 

Kennedy Space 

Centerb

November 

1998

3 years

3-year followon contract 

also awarded 

to incumbent 

contractorc

3,013 general-purpose desktop 

computing seats

421 scientific and engineering computing 

seats 

364 maintenance-only seats

293 network-attached device seats (a 

desktop unit acquired from non-ODIN 

sources attached to the network)

57 World Wide Web seats 

40 application database seats

109 file storage seats

17,615 telephone service seats

48 remote communications seats

Additional services include asset 

management; help-desk services; 

catalog orders (e.g., printers); special 

orders (e.g., toner for network printers); 

and infrastructure upgrades (e.g., 

upgraded telephone system).

30,151,512 Under the terms of the 

NASA ODIN master 

contract, agencies 

may acquire one or 

more categories of 

service (such as 

desktop hardware and 

software) without other 

types of services (such 

as local- or wide-areanetwork services). 

Some associated 

services, such as user 

support and 

infrastructure 

management, are 

provided as a part of 

these seats.

CMS June 1999 3 years 5,100 general-purpose desktop computer 

seats

325 portable computer seats 

Additional services include asset 

management; catalog orders; special 

orders (e.g., engineering services); and 

infrastructure upgrades (e.g., gateway 

servers). 

20,462,675 Same as above.

GSA’s FSS Schedule 70 contracts

ATF April 2001 3 years 6,000 desktop/laptop computer seats

300 server seats

1,143 printer/scanner seats

1,275 nonseat annual server, printer, and 

scanner maintenance support

Additional services include centralized 

management, help-desk support, desk 

side support for key personnel, order 

tracking and support, network 

infrastructure, and installation services 

(which includes asset management and 

order tracking).

62,070,575 ATF awarded its first 

seat management 

contract on October 9, 

1997. After this 

contract expired, ATF 

awarded a second 3-

year contract to the 

incumbent contractor 

in April 2001. The 

contract costs are from 

the date of the original 

contract.

(Continued From Previous Page)

Contract/ 

Agency

Date of 

contract

awarda

Contract 

term 

Number and types of seat 

management services acquired, as of 

July 31, 2001

Reported actual

contract costs,

as of

July 31, 2001 Comments
Page 9 GAO-02-329 Desktop Outsourcing

a

This is the date of the resulting delivery order, task order, or blanket purchase agreement signed by 

the agency.

b

NASA implemented seat management at 10 different sites. Each site had a different mix of seats and 

services. Since this table is for illustrative purposes, we used the Kennedy Space Center as an 

example of a NASA seat implementation site because we visited this site. See appendix I for further 

information on the other 9 NASA seat implementation sites.

c

Instead of optional years, NASA’s contract authorizes the award of sole-source follow-on contracts in 

which a new delivery order is negotiated and signed with the incumbent contractor.

d

At the time of our review, DLA had implemented seat management only at its headquarters complex.

e

DLA’s base period was from October 1, 2000, through September 30, 2001, following a transition 

period from the date of contract award through September 30, 2000.

Source: GAO, based on documents from each of the agencies. We did not verify this information.

Rationales for 

Adopting Seat 

Management Varied

Each agency in our review cited unique reasons for implementing seat 

management. However, the most common ones fit into three categories:

(1) improving IT management, (2) improving end-user support and 

productivity, and (3) obtaining new technology or upgrading current 

technology. In addition, although lower cost was not the primary reason 

that agencies chose the seat management approach, cost issues were a 

consideration. 

• Improving IT management. Five of the six agencies reported that part 

of their rationale for implementing a seat management approach was to 

enhance management of IT resources, which included improvements to 

areas such as standardization, asset management, and IT human capital. 

For example, the Peace Corps implemented seat management, in part, 

DLAd April 2000 1-year base 

period, with 

four 1-year 

optionse

First option 

exercised

2,102 desktop computer seats 

251 laptop computer seats

1,523 printer seats

68 server seats

4 plotter seats,

64 personal digital assistant seats 

Additional services include local-areanetwork administration and operations; 

technical support; desktop and server 

maintenance; asset and configuration 

management; installations, moves, 

additions, and changes; network 

monitoring; monthly service-level 

reporting; and help-desk support.

6,781,493 DLA has maintained 

ownership of the 

assets acquired 

through its seat 

management contract.

(Continued From Previous Page)

Contract/ 

Agency

Date of 

contract

awarda

Contract 

term 

Number and types of seat 

management services acquired, as of 

July 31, 2001

Reported actual

contract costs,

as of

July 31, 2001 Comments
Page 10 GAO-02-329 Desktop Outsourcing

to improve and standardize its IT environment—which consisted of 

diverse, old, and incompatible computing equipment—and to obtain a 

reliable inventory of its IT assets. As another example, NASA wanted to 

shift IT asset management responsibilities for its diverse enterprises to 

contractors and use government personnel that were performing 

desktop support for other mission-related work.

• Improving end-user support and productivity. All six agencies 

reported that at least part of their rationale for implementing seat 

management was to improve desktop management from a user 

perspective. Agency officials stated that they wanted to improve user 

satisfaction and service levels or optimize service delivery by using 

commercial best practices. For example, DLA implemented seat 

management to address the operational impairment of the users at its 

headquarters complex due to problems with its distributed computing 

environment, including frequent and extended local-area-network 

downtime and remote access problems. Treasury’s Departmental 

Offices implemented seat management, in part, to combine several 

services, such as help-desk support and maintenance, so that users 

could have a single point of contact rather than having to deal with 

multiple vendors. 

• Obtaining new technology or upgrading current technology. Four 

agencies reported that part of their rationale for implementing seat 

management was to obtain technology, upgrade current software and 

hardware, and/or provide for periodic technology refreshment. For 

example, ATF wanted to provide its special agents, field inspectors, and 

support staff with personal computers and laptops because they could 

not communicate vital information with each other unless they used 

unsecured cellular or public telephones. Furthermore, ATF wanted to 

institute a technology refreshment program to upgrade or replace its 

equipment every 3 years. Another example is CMS, which implemented 

seat management in part to update its systems and to ensure that its 

equipment was compliant with Year 2000 requirements.

Reducing Costs Was Not the 

Primary Objective

Although half the agencies said that reducing costs was one of their seat 

management objectives and acknowledged its importance, agency officials 

noted that it was not the primary objective. The other agencies cited 

reasons other than costs for implementing seat management. For example, 

DLA officials indicated that the critical issue for their agency was 

improving its headquarters computing environment, which, among other 
Page 11 GAO-02-329 Desktop Outsourcing

problems, had frequent downtimes. In addition, Peace Corps officials 

stated that the agency did not choose seat management to reduce the 

agency’s budget requests associated with distributed computing and did 

not expect that it would. Although cost reduction may not have been a 

primary objective, other cost-related considerations, such as the ability to 

better predict and manage their costs, were cited by all of the agencies as 

reasons for implementing seat management. 

The organizations in our November 2001 IT services outsourcing study also 

did not identify reducing the overall costs of the existing IT service as a 

reason for their decision to implement an outsourcing solution.8

 However, 

their reasons did include some cost considerations, namely, to reduce 

capital investments and to better predict operating costs by contracting for 

IT services using a standard unit of measure. For example, under seat 

management, services are priced on a per-seat basis.

Agencies Reported 

Positive Seat 

Management Results, 

but Costs and Benefits 

Were Not Adequately 

Assessed and 

Monitored

Although every agency in our review reported positive results from 

implementing seat management, we could not determine whether they 

were achieving expected costs and benefits because the agencies had not 

(1) conducted adequate pre-seat-management analyses and (2) tracked all 

actual costs and benefits. Specifically, agencies generally did not 

sufficiently analyze their baseline and projected costs and benefits up front 

and monitor actual implementation results. Without such critical 

information, an agency is not positioned to make well-informed decisions 

about seat management options or able to convincingly demonstrate real 

results. Although the six agencies were not monitoring overall seat 

management benefits, all were tracking elements of contractor 

performance. While it can be an important indicator of results, tracking 

contractor performance is not a substitute for tracking whether the overall 

cost and benefit goals of the seat management program are being achieved.

Agencies Reported a Variety 

of Seat Management Results

The six agencies in our review reported that their seat management 

initiatives had achieved positive results. These results relate to a wide 

variety of areas that can be categorized into four general areas: improving 

IT management, improving end-user support, enhancing mission support, 

8

U.S. General Accounting Office, Information Technology: Leading Commercial Practices 

for Outsourcing of Services, GAO-02-214 (Washington, D.C.: November 30, 2001). 
Page 12 GAO-02-329 Desktop Outsourcing

and upgrading technology. Many of these reported accomplishments 

directly correlate with the reasons that agencies chose to implement seat 

management.

• Improving IT management. Five agencies noted improvements in areas 

such as asset management, security, standardization and 

interoperability, and/or planning for periodic technology refreshments. 

For example, the Peace Corps reported that before implementing seat 

management, the agency had a wide variety of incompatible hardware 

and software that made it difficult for employees to easily share 

information, and that managing its assets was very difficult. According 

to Peace Corps officials, seat management allowed the agency to 

implement a standard technology environment and, as a result, 

information is much more easily shared across the agency. Various 

NASA organizations also reported a myriad of IT management 

improvements, such as improved consistency and currency of operating 

systems and applications; the automated distribution of software, 

including computer virus protection; a better understanding of the 

entity’s IT inventory, which resulted in the removal of obsolete 

equipment; and improved software license management.

• Improving end-user support. All six agencies reported that end-user 

support has improved since they implemented seat management. In 

particular, they generally reported improvement in the quality and 

timeliness of help-desk support. At DLA, for example, before seat 

management, customer dissatisfaction with its headquarters IT helpdesk services was widespread. DLA seat management officials believe 

that, on the basis of the results of customer surveys, the quality and 

timeliness of the help-desk support improved substantially after seat 

management was implemented. At NASA, officials in the Office of Space 

Flight reported that implementing seat management has resulted in 

more consistent high-quality service to all users. 

• Enhancing mission support. All six agencies stated that seat 

management has enhanced their mission support and productivity 

because, for example, the staff were assigned to other duties or were 

freed from desktop management duties. In one case, the Treasury 

assistant director responsible for seat management said that after 

implementing seat management, fewer agency employees were needed 

to support IT operations for the Departmental Offices. Therefore, 

Treasury was able to reassign six staff to other organizations within the 

department to help develop new applications software and work on 
Page 13 GAO-02-329 Desktop Outsourcing

security issues. Similarly, NASA’s Office of Space Flight reported that 

seat management helped improve the agency’s asset management 

services by reducing the amount of work that agency staff have to 

perform to maintain annual inventories of government-owned property 

and auditing of contractors’ property control procedures. 

• Upgrading of technology. Four agencies reported that they upgraded 

their technology under seat management in a timely manner. For 

example, using the seat management contract, ATF provided over 4,000 

personal and laptop computers to field agents, among others, in about 6 

months. CMS reported that seat management enabled it to deploy Year 

2000 compliant equipment and software throughout the agency in a little 

more than 3 months.

Agencies Lacked Facts on 

Whether Expected Costs 

and Benefits Were Being 

Achieved

We could not determine whether the agencies were achieving expected 

costs and benefits because they generally did not (1) sufficiently analyze 

their baseline and projected costs and benefits up front and (2) routinely 

monitor all actual seat management costs and benefits. Like any other 

major IT investment, seat management initiatives should be supported by a 

well-developed business case that evaluates the expected returns against 

the costs. An explicit understanding of the expected costs and benefits up 

front provides the basis for a sound financial and strategic decision and 

creates a baseline against which managers and executives can measure 

progress. According to OMB guidance, an analysis of the expected costs 

and benefits of IT investments, as well as the costs and benefits of 

alternatives, should be included in the justification for major investments.9

Similarly, our guidance on IT investment management calls for agencies to 

identify the expected costs and benefits of proposed investments.10 In 

addition, our research on leading commercial practices for acquiring IT 

9

Office of Management and Budget (OMB), Circular A-130, Management of Federal 

Information Resources (November 30, 2000) and Circular A-11, Part 3, Planning, 

Budgeting, and Acquisition of Capital Assets (July 2001). These circulars define capital 

assets as including IT that is used by the federal government and has an estimated useful life 

of 2 years or more. Such assets may be acquired in different ways, including through 

lease/purchase or other capital leases regardless of whether title has passed to the federal 

government or through an operating lease for an asset with an estimated useful life of 2 

years or more.

10U.S. General Accounting Office, Information Technology Investment Management: A 

Framework for Assessing and Improving Process Maturity, GAO/AIMD-10.1.23, Exposure 

Draft (Washington, D.C.: May 2000). 
Page 14 GAO-02-329 Desktop Outsourcing

services found that the optimizing and baselining of existing internal IT 

processes provide an organization with the information to make a sourcing 

decision.11

Although all six agencies analyzed their expected seat management costs 

and/or benefits or baselined their existing environment, these analyses 

were missing critical elements. Specifically,

• NASA and CMS estimated the costs and benefits that they expected to 

achieve with seat management, including an analysis of alternatives. 

However, internal agency costs, such as those associated with program 

and contract management, were not included in their estimates. 

Moreover, NASA and CMS’s analyses did not include a thorough or 

reliable baseline of the costs associated with their pre-seat-management 

computing environments. For example, in a November 2001 

postimplementation report, a private-sector firm concluded that it was

not possible to determine with any degree of confidence whether NASA 

had saved money because of the lack of a comprehensive baseline.12

• While Treasury’s Departmental Offices estimated the costs of seat 

management and an alternative, it did not estimate the benefits for 

either approach. In addition, the cost estimate was developed about a 

week before the contract award and was based on the winning bidder’s 

proposal.

• Although DLA and the Peace Corps performed analyses of their preseat-management costs, they did not estimate the expected costs or 

benefits of seat management or any alternatives. In addition, the Peace 

Corps’ analysis was not a true baseline for the seat management 

program that the agency implemented because it included (and did not 

distinguish between) the costs for both domestic and foreign 

operations, whereas it implemented seat management only for its 

domestic operations.

• ATF did not estimate the costs and benefits of seat management or 

alternatives before implementing this approach in 1997. However, in 

11GAO-02-214.

12Kelly, Anderson & Associates, ODIN Program, The Outsourcing Desktop Initiative for 

NASA: Post Implementation Business Case Assessment (November 2001). 
Page 15 GAO-02-329 Desktop Outsourcing

2000, when the contract was under consideration for renewal and the 

agency was reviewing its possible choices, a cost study was performed 

that identified the agency’s total cost of ownership and service levels 

under seat management and compared them with peer organizations.

However, this study did not include an analysis of non-seatmanagement13 alternatives or expected benefits.

The agencies cited various reasons for not completing a thorough analysis 

of their existing environment and expected costs and benefits of seat 

management and alternatives, including that they lacked time or resources 

to complete the analysis, that upper-level management had mandated that 

outsourcing and a performance-based contract be used, and that budgetary 

savings was not a goal of the seat management program. However, such an 

approach is risky. Together with OMB, we have long held that the analysis 

of costs and benefits is critical to IT investment decision-making. As we 

noted in our 1997 IT investment guide, an IT investment process cannot 

operate effectively without accurate, reliable, and up-to-date data on 

project costs and benefits.14 In addition, it is important that agencies 

consider the criticality of distributed computing to their mission, not just 

the size of the investment, when determining the necessary 

comprehensiveness of the analyses of costs and benefits.

Once an IT investment is implemented, OMB Circular A-130 and our IT 

investment management guide15 recommend that agencies validate 

whether estimated costs and benefits are being achieved. In an outsourcing 

arrangement, to obtain a true picture of the cost of the investment, it is 

important to consider both the cost of the contract as well as the agency’s 

internal costs to administer the program and contract. Each of the six 

agencies tracked contractor costs. However, while they provided us with 

estimates of their internal costs for managing the seat management 

contract and program (in some cases just providing salaries and benefits 

for a given month), agencies in our review did not routinely monitor all

13The analysis included an assessment of using the GSA seat-management contract 

alternative.

14U.S. General Accounting Office, Assessing Risks and Returns: A Guide for Evaluating 

Federal Agencies’ IT Investment Decision-making, GAO/AIMD-10.1.13 (Washington D.C.: 

February 1997). 

15GAO/AIMD-10.1.23. 
Page 16 GAO-02-329 Desktop Outsourcing

internal agency costs associated with seat management.16 Such costs can 

be substantial. For example, NASA’s Kennedy Space Center reported that 

its salaries and benefits to manage the Office of Space Flight’s four seat 

management implementations in July 2001 were about $146,000. If 

projected over the life of the original 3-year contract,17 the center’s salaries 

and benefit costs to manage this initiative would be about $5.3 million. 

None of the agencies routinely monitored the actual overall benefits of 

their seat management programs. This includes the two agencies (NASA 

and CMS) that had estimated the quantifiable benefits that they had 

expected to achieve. For example, CMS estimated that it would have 

achieved quantifiable benefits of about $22 million between fiscal years 

1999 and 2001 in increased staff productivity and the avoidance of costs 

associated with, for example, asset theft. However, CMS has not validated 

whether these benefits have been achieved. The agencies had a variety of 

reasons for not monitoring actual benefits, including that they lacked 

resources or that, because they did not baseline their costs before seat 

management, they did not have a basis to perform a comparison. Since 

agencies’ rationales for adopting seat management were generally to meet 

certain programmatic objectives and not to achieve cost savings, it is 

especially important that they monitor benefits to ensure that their seat 

management programs are meeting these objectives.

Although the six agencies were not tracking overall seat management 

benefits, all of them were measuring and tracking some aspects of 

contractor performance, typically by reviewing contractor-provided data 

periodically (e.g., monthly or quarterly). The agencies have specific 

performance metrics within their contracts to measure contractor 

performance, generally including measures related to service delivery and 

availability and user satisfaction or help-desk performance. The agencies 

16During exit conferences with the agencies, most acknowledged that they did not monitor 

all internal agency costs but stated that they could identify the number of staff associated 

with the management of their seat management programs. In addition, DLA provided us 

with several months’ worth of costs, which included categories such as salaries and 

benefits, travel, rent, communication, and utilities. However, these costs were for the entire 

Technology Services and Infrastructure Support Directorate, of which the seat management 

office is only a part. A DLA official stated that the agency could extract the seat 

management costs from these amounts, but these data are not presented to management at 

that level of detail.

17In June 2001, NASA signed a 3-year follow-on contract with the incumbent Kennedy Space 

Center seat management contractor, with a period of performance beginning December 1, 

2001. 
Page 17 GAO-02-329 Desktop Outsourcing

use these measures as the basis for approving vendor payments, awarding 

bonuses or other incentives, and/or applying penalties.18 For example, one 

agency assessed its contractor’s performance against 24 service-level 

agreements,19 such as server availability and customer satisfaction, to 

determine whether penalties were warranted (this agency’s contract does 

not provide for incentives or bonuses). For fiscal year 2001, this agency 

assessed its contractor penalties totaling $30,295. In another example, 

NASA uses “retainage” pools in which a certain percentage (the amount of 

which is determined by each center’s contract) of the contractor’s monthly 

seat price is retained by the government and disbursed periodically on the 

basis of a review of the contractor’s performance. One center retained 

about $893,000 between December 1998 and June 2001, of which it 

disbursed about $509,000. 

Agency seat management contracts sometimes did not include contractor 

performance measures pertaining to all business goals of the seat 

management program. For example, one of the Peace Corps’ performance 

goals in its September 2000 strategic plan is to pursue efforts to cut costs 

and improve agency productivity. Although the implementation of seat 

management is a part of the evaluation criteria associated with this goal, 

the agency’s seat-management performance metrics plan does not include a 

performance measure for cost reductions or improvements to agency 

productivity. In another case, a private-sector firm’s review of NASA’s ODIN 

program noted that the agency’s contracts address only portions of its 

program objectives. The firm recommended that NASA initiate a full review 

of its metrics.

Although critical to ensuring that the agency is obtaining contractually 

required services and an indicator that certain types of benefits are, or are 

not, being achieved (e.g., improved user satisfaction), measuring and 

tracking contractor performance does not take the place of tracking the 

overall benefits of seat management programs. For example, contractor 

performance metrics do not measure many of the types of benefits that 

18Three of the agencies in our review have awarded incentives or applied penalties to their 

contractors. In addition, ATF has not finalized its service-level agreements with its seat 

management contractor. Agency officials stated that they are monitoring contractor 

performance against these interim agreements but have not finalized the penalties and 

incentives that will be associated with the final service-level agreements.

19Service-level agreements define the agency’s expectations and are used to track and 

measure a contractor’s performance.
Page 18 GAO-02-329 Desktop Outsourcing

agencies believe they are achieving or wanted to achieve, such as increased 

end-user productivity, improved mission support through the transfer of 

agency IT staff to more critical tasks, and improved standardization.

Some agencies have recognized the need to review their actual seat 

management costs and benefits and have obtained, or plan to obtain, 

independent assessments of at least some aspects of their seat 

management program. For example, 

• NASA contracted with a private-sector firm to perform a 

postimplementation business case assessment. In November 2001, this 

firm reported that (1) over 90 percent of NASA management officials 

surveyed indicated that ODIN provided some benefit in areas such as 

improved service and standardization and (2) it was impossible to 

determine whether NASA is saving money because of the lack of a 

comprehensive pre-seat-management baseline, although there was some 

evidence that the agency had achieved savings due, at least in part, to 

seat management. 

• In late 2000, CMS conducted a pilot total-cost-of-ownership study of its 

post-seat-management distributed computing environment using a 

private-sector methodology and software tool. CMS limited its data 

collection to readily available information and did not attempt to 

conduct a full-scale study.

• DLA plans to have a contractor complete a postimplementation totalcost-of-ownership study, which evaluates the current distributed 

computing environment of an organization, and user satisfaction 

benchmark survey in the spring.

• In January, Treasury signed a contract for the completion of a total-costof-ownership seat management study that is expected to be completed 

in June 2002. In responding to a draft of this report, Treasury’s 

Departmental Offices stated that this study is expected to (1) review 

current costs and associated benefits and (2) allow the department to 

predict the expected costs of services for the future years of the 

contract and identify specific benefits expected to be derived from these 

costs.

• Peace Corps officials stated that the agency intends to issue a contract 

for a total-cost-of-ownership review by the end of this fiscal year to help 

it identify seat management results. In addition, the Peace Corps 
Page 19 GAO-02-329 Desktop Outsourcing

contracted for an independent review of user satisfaction, and it expects 

to receive the final report pertaining to this review by the end of March. 

In commenting on a draft of this report, the Peace Corps stated that it 

expects that these analyses will address agency productivity and costreduction performance indicators.

For postimplementation reviews to be most effective, it is critical that 

agencies have an established baseline before implementation so that there 

could be a basis of comparison for determining progress. However, 

because most of the six agencies did not have a full or reliable baseline of 

their costs before implementing seat management, it would be difficult to 

validate whether any cost savings had been achieved. For example, the 

CMS seat management program manager told us that it would be difficult 

to determine whether expected cost savings are being achieved because 

the agency lacks comparable information on its costs before implementing 

seat management.

Risks Were Identified, 

but Analyses Were 

Incomplete or Not 

Timely 

Although four agencies identified a variety of risks, these analyses were 

incomplete or not performed in a timely manner. OMB and our guidance 

note that agencies should address potential risks, such as investment, 

organizational, funding, and technical risks, when considering new IT 

investments.20 Not identifying risks or developing strategies to resolve them 

can be problematic since most IT investments require a constant focus on 

interim results and successful risk management strategies to effectively 

address existing or emerging factors that influence implementation results. 

Nevertheless, of the four agencies that identified seat management risks, 

none ranked their risks and only one identified actions to mitigate risks 

before implementing seat management. In addition, two agencies did not 

assess risks at all. One important risk area associated with outsourcing—

ensuring that contracts contain clauses that protect the government’s 

interests—was adequately addressed by the six agencies for (1) quality 

assurance, (2) termination rights, and (3) the government’s rights to 

supplied hardware and software at the end of contract performance.

Of the six agencies we reviewed, four identified risks associated with their 

seat management implementations. In particular, consistent with OMB and 

20Office of Management and Budget, Circular A-11, Part 3 Supplement, Capital 

Programming Guide, and GAO’s IT investment management guidance, GAO/AIMD-10.1.23, 

and GAO/AIMD-10.1.13. 
Page 20 GAO-02-329 Desktop Outsourcing

our guidance, which specifies a variety of risks for agencies to consider,21

these four agencies identified risks relating to costs, time frames for 

implementation, contractor performance, and technical issues as well as 

other risks. Examples of risks identified in these categories are discussed 

below:

• Costs. All four agencies identified cost as a risk. For example, Treasury 

determined that its cost risk was low because multiple vendors would 

be bidding. 

• Time frames for implementation. Three agencies identified possible 

delays as a risk. For example, CMS identified implementation as a risk 

that it would mitigate by developing milestones and providing contract 

incentives.

• Contractor performance. Three agencies identified contractor 

performance issues as a risk area. For example, NASA identified 

contractor performance as a manageable risk, but was concerned that if 

it were to become a problem, mission effectiveness might be 

compromised because the agency would have limited staff available to 

correct the deficiencies. The agency planned to address this risk by, for 

example, limiting the contract to 3 years and having a pool of vendors 

from which to choose. 

• Technical issues. Three agencies identified technical issues as a risk 

area. For example, CMS was concerned about the suitability of the 

hardware and software to be provided by its seat management 

contractor. CMS addressed this risk by requiring testing of equipment 

proposed by firms competing for the seat-management contract award, 

requiring postaward testing of initial equipment installations, and using 

an independent contractor to test the capabilities of systems proposed 

for the refreshment cycle.

• Other risks. Two agencies identified other risks. For example, NASA 

identified the need for coordination between ODIN-related desktop and 

intracenter communication architectures and other major agency 

initiatives, including its Integrated Financial Management Program, and 

vendors providing non-ODIN computing and communication services. 

21See footnote 20.
Page 21 GAO-02-329 Desktop Outsourcing

NASA’s plans for addressing these risks included extensive internal 

communication and the development of program interface agreements.

Even though four agencies identified the risks associated with seat 

management, these analyses were incomplete and/or not timely. 

Specifically,

• None of the analyses ranked risks in order of their potential impacts on 

agency operations. OMB’s guidance provides examples of how risks can 

be characterized by the likelihood of their occurrence and the severity 

of potential consequences and then ranked according to their 

importance.22

• Only CMS identified actions, before implementing seat management, to 

mitigate risks. NASA also identified actions to mitigate risks, but this 

analysis was conducted over a year after award of the ODIN master 

contract. The other two agencies did not identify planned mitigation 

actions. OMB’s Capital Programming Guide states that agencies 

should determine how best to mitigate the impact of each risk that they 

identify.23 Developing preventive measures and countermeasures to 

successfully deal with problems as they develop is critical.

Two of the agencies in our review, ATF and the Peace Corps, did not assess 

their seat management risks at all. According to ATF officials, the agency 

did not assess the risks of its seat management initiative because it was 

ordering equipment and services from the FSS schedule and chose to rely 

on maintaining a close relationship with its contractor to ensure quality 

services. However, this approach is not a substitute for a well-thought-out 

assessment of risks that includes mechanisms to mitigate identified risks. 

As for the Peace Corps, agency officials stated that they lacked the 

resources to conduct a risk assessment.

22Office of Management and Budget, Evaluating Information Technology Investments: A 

Practical Guide (November 1, 1995) and Circular A-11. One ranking process included 

assigning a score ranging from 1 to 10 to each risk and then multiplying each score by a 

percentage weight reflecting the relative importance of each factor in the agency’s decision 

processes.

23Mitigation approaches include transferring, avoiding, reducing, assuming, and sharing the 

potential for an event that could produce an adverse consequence, or for the adverse 

consequence itself. 
Page 22 GAO-02-329 Desktop Outsourcing

Because seat management relies on the use of contractors to perform 

critical IT services, it is essential that the contract contain certain clauses 

that reduce the government’s risks. In particular, the Federal Acquisition 

Regulation requires that contracting officers include in contracts, including 

seat management contracts, appropriate quality requirements. The type 

and extent of contract quality requirements needed depend on the 

particular acquisition and may range from inspection at the time of 

acceptance to requiring that the contractor implement a comprehensive 

program for controlling quality. In addition, seat management contracts, as 

government contracts, should include provisions for termination for the 

convenience of the government and termination for default. Finally, seat 

management contracts should include some provision for the disposition of 

contractor-supplied property (hardware and software) at the end of 

contract performance to ensure agency operations continue uninterrupted. 

All of the agencies’ contracts adequately addressed the issues of quality 

assurance, termination rights, and rights to supplied hardware and 

software at the end of contract performance.24 In general, the contracts 

making use of the GSA and NASA master contracts—the Peace Corps, 

Treasury’s Departmental Offices, NASA, and CMS—tended to be more 

comprehensive in dealing with these issues than the contracts making use 

of GSA schedule contracts—DLA and ATF. The GSA and NASA master 

contracts were more likely to include specific provisions, especially 

regarding the disposition of hardware and software, than the GSA schedule 

contracts, which more typically relied on standard government contract 

clauses.

Lessons Learned Can 

Help Other Agencies 

More Effectively 

Implement Seat 

Management

By incorporating lessons learned from those who have implemented seat 

management, agencies considering this approach could more effectively 

plan their activities and reduce the risk that they will encounter problems 

experienced by others. Moreover, incorporating lessons learned from peers 

who have engaged in similar sourcing decisions is a leading commercial 

practice for acquiring IT services. The numerous lessons identified by 

agencies, their contractors, and private-sector research firms generally fall 

into six categories: (1) agency commitment, (2) preparation and planning, 

(3) solicitation and contract award, (4) program and contract management, 

24The DLA seat management contract did not specifically address disposition of contractorsupplied hardware and software. DLA advised us that it bought and maintained ownership 

of all contract assets.
Page 23 GAO-02-329 Desktop Outsourcing

(5) agency/contractor partnership, and (6) communication. These lessons 

are generally consistent with our report issued last year on the leading 

commercial practices for acquiring IT services.25 In addition, these lessons 

are often interrelated and build on one another. For example, if an agency’s 

preparation and planning are lacking, developing an effective solicitation 

and contract award process could be difficult.

Agency Commitment Is 

Crucial

Moving to outsourcing solutions such as seat management can involve a 

cultural change for government organizations because it may require a 

change to an agency’s operating model, such as using a contractor to 

provide IT services using a performance-based contract. In the past, an 

agency’s IT services may have been provided by government staff, in which 

case it is important that the agency consider the impact of outsourcing on 

these employees. In addition, the agency may not be familiar with 

outsourcing or the use of performance-based contracts, in which the 

customer agency specifies the outcome or result it desires and allows the 

vendor to decide how best to achieve the desired outcome. As a result, it is 

crucial that agencies demonstrate a commitment to change. Without such a 

commitment, success is more difficult to ensure. For example, according to 

the GSA Federal Technology Service’s chief information officer (CIO), 

GSA’s decision to implement seat management was driven, in part, by the 

desire to show the agency’s support for its seat-management 

governmentwide acquisition contract.26 He asserted that GSA’s seat 

management implementation did not succeed because the agency’s culture 

did not support the change, and seat management was not implemented in 

a consistent manner throughout the agency. GSA’s FSS CIO provided a 

similar assessment of the agency’s seat management implementation.

One way that an agency can demonstrate a commitment to seat 

management is through the involvement of top agency officials. Our wideranging work on federal management issues has shown that perhaps the 

single most important element of successful management improvement

25GAO-02-214.

26In the exit conference with GSA, agency officials noted that while the timing of the 

decision to implement seat management may have been driven by the desire to show the 

agency’s support for the concept, the agency also implemented seat management to achieve 

other goals, such as increased standardization and decreased costs per seat. 
Page 24 GAO-02-329 Desktop Outsourcing

initiatives is the demonstrated commitment of top leaders to change.27

Moreover, our research has shown that executive leadership is a critical 

success factor for outsourcing IT services in the commercial world. The 

applicability of this principle to seat management was echoed by federal 

agencies and private-sector organizations alike. For example, (1) Treasury’s 

seat management program manager stated that for seat management to 

succeed, agency executives need to understand and support it; (2) NASA’s 

ODIN delivery order contracting officer representative at the Goddard 

Space Flight Center noted that outsourcing is extremely difficult unless 

there is a clear mandate from the top of the organization; (3) a NASA 

consultant’s report stressed that unequivocal senior management support 

of ODIN is vital to its success; and (4) a member of the Industry Advisory 

Council’s Managed Services Shared Interest Group28 stated that top agency 

officials, including the CIO, chief operating officer, and chief financial 

officer must “buy in” to seat management and be committed and involved.

To address the culture change sometimes imposed on an agency 

implementing seat management, the Managed Services Shared Interest 

Group and GSA’s Federal Technology Service noted that change 

management processes can help address this issue. In addition, our 

research of leading practices associated with the outsourcing of IT services 

provided examples of actions that entities can take to demonstrate 

executive leadership, namely the following:

• keep the entire organization informed throughout the outsourcing 

initiative;

• conduct regular peer-to-peer meetings at each level in the organization;

• secure key executive support before eliciting organizational support; 

and

• establish a communications team to promote the idea of outsourcing.

27U.S. General Accounting Office, Management Reform: Elements of Successful 

Improvement Initiatives, GAO/T-GGD-00-26 (Washington, D.C.: October 15, 1999). 

28The Industry Advisory Council is an organization of IT professionals representing more 

than 270 companies nationwide that provide products and services to the public. The 

mission of its Managed Services Shared Interest Group is to facilitate information flow; 

foster dialog about best practices; and influence the future of managed services (which 

includes seat management) to the mutual benefit of government, industry, and end users.
Page 25 GAO-02-329 Desktop Outsourcing

Preparation and Planning 

Are Critical

Success in implementing seat management rests in large part on thorough 

preparation and planning both before and after the contract is awarded. 

For preaward planning, it is vital that an organization optimize and baseline 

its internal IT processes to provide it with essential information to make a 

sourcing decision.29 Another important preaward planning process is 

developing a business case that evaluates the expected returns against the 

costs and focuses on strategic objectives that are agreed on by key 

stakeholders. Moreover, it is critical that agencies gather as much data as 

possible regarding, for example, inventories, transaction volumes, and 

service requirements. Finally, according to Gartner, the most positive 

desktop outsourcing outcomes should be expected when the outsourcing 

organization’s desktop environment is already under control (including 

having good standards, established processes, and predictable service 

levels) and effort is expended to define and maintain an effective 

relationship between the affected parties.30

Without such preaward preparation and planning, agencies could 

encounter significant problems during implementation. For example, 

Peace Corps officials reported that the agency had file conversion 

problems during its seat management transition because it did not know 

the size and number of files involved and greatly underestimated the time 

that it would take to complete the conversion. Peace Corps seatmanagement contractor officials estimated that solving the file conversion 

problem required the vendor to add five staff members over a 2-month 

period. One of the contractor officials added that the vendor did not pass 

these costs on to the Peace Corps because the vendor wanted to 

demonstrate its commitment to the contract.

29GAO-02-214.

30Gartner, Inc., Desktop Management Outsourcing: Do’s and Don’ts, Research Note DF-14-

0931 (October 2, 2001). 
Page 26 GAO-02-329 Desktop Outsourcing

Postcontract award planning is equally important. In particular, agencies in 

our review, as well as private-sector organizations,31 repeatedly cited the 

importance of the transition period between awarding the contract and 

reaching a “steady state.” In addition, GSA’s seat-management program 

office noted that one of the most difficult aspects for both the agency and 

the contractor is learning the existing infrastructure during the transition 

period. Officials from two agencies stated that they should have allowed 

for more time to complete the transition period. One of these officials 

asserted that the agency should have doubled the amount of time for 

transition because the 3-month period that it had used did not allow 

adequate time to set up help-desk procedures or define how to monitor the 

network. The seat management contractor for this agency also 

acknowledged that the transition period was ill-defined and did not 

adequately lay out the parallel operations with the incumbent contractor. 

Continuous planning after the transition period is also important. For 

example, officials at Treasury and NASA noted the importance of planning 

ahead for technology refreshments and future IT requirements, 

respectively.

Examples of practices that agencies and/or private-sector organizations 

implemented, or suggested should be implemented, in the planning area are 

as follows:

• Solidly track and measure the existing IT organization. A leading 

research firm, the Giga Information Group, Inc., suggested that an entity 

employ solid tracking and measurement of its IT organization before 

outsourcing because only then would it be able to determine whether 

the arrangement has been successful.32 In addition, this firm noted that 

constructing payments and incentives accurately is extremely difficult, 

if not impossible, unless the entity has already established 

measurements for the functions being outsourced.

• Consider using a total-cost-of-ownership study. Officials from the 

Managed Services Shared Interest Group, the Peace Corps, DLA, and 

GSA cited the value of total-cost-of-ownership studies, which evaluate 

31The private-sector organizations referred to in this section include the seat management 

contractors for the six agencies and GSA; Gartner, and Giga Information Group, Inc. (private 

research firms); and members of the Managed Services Shared Interest Group.

32Giga Information Group, Inc., Payment and Incentives for Outsourcing Management

(July 27, 2000). 
Page 27 GAO-02-329 Desktop Outsourcing

the current distributed computing environment of the organization. For 

example, a member of the shared interest group stated that meaningful 

data must be collected to put the agency’s current environment and its 

associated costs in perspective. Officials from DLA and the Peace Corps 

also suggested outsourcing the total-cost-of-ownership studies. For 

example, DLA officials believed that the agency’s use of an objective 

consulting firm to help develop a total-cost-of-ownership study and 

other analyses worked well because the agency was able to take 

advantage of the firm’s seat management expertise.

• Develop a transition plan. Among the most important lessons learned 

identified by a GSA-supported, seat-management lessons-learned 

workshop was to develop a detailed project/transition plan. In addition, 

a leading commercial practice for the outsourcing of IT services is 

developing a transition plan, which can help make the move from 

internal to external IT services a smooth one. The clear definition of 

responsibilities and the careful consideration of employees’ needs 

matched against the organization’s needs enable both the client and the 

provider to focus on responsibilities that they can execute 

successfully.33 In addition, officials from DLA suggested that agencies 

establish a governance structure for monitoring contractor performance 

before the transition period begins.

• Implement the program in phases. ATF and NASA’s Office of Space 

Flight suggested that seat management be implemented in phases. For 

example, ATF’s CIO touted the agency’s development of an installation 

“cookbook” that was used as a repeatable process for other locations 

and refined as seat management was implemented at these other 

locations. NASA’s Office of Space Flight suggested that an organization 

new to seat management begin with core requirements and add new 

services after the contractor has stabilized operations.

33In cases in which the seat management contractor is assuming responsibility for functions 

previously performed by federal employees, it is especially important that the organization 

address internal staff issues. This can include, when appropriate and consistent with 

organizational objectives, (1) encouraging the transition of staff to the seat management 

contractor; (2) assisting employees who do not want to transfer in finding other jobs, either 

within the organization or at another organization; and (3) developing employee retention 

programs to keep key people.
Page 28 GAO-02-329 Desktop Outsourcing

Solicitation and Contract 

Award Should Be Carefully 

Managed

Agencies emphasized the importance of carefully managing the contract 

solicitation and award process. This involves using a solicitation and award 

process that (1) includes a solicitation document that is based on the goals 

and requirements of the agency; (2) encourages contractors to bid; (3) 

effectively evaluates the suitability of bidding contractors; (4) results in a 

winning vendor that best suits the organization’s needs; and (5) produces a 

contract with fair pricing and with specific, relevant, and measurable 

performance requirements geared toward outcomes. In particular, at the 

beginning of the process, it is important that the agency understand its 

needs and convey this in the solicitation document. For example, according 

to Gartner, to develop valid pricing estimates, the contractor needs as 

much information as possible regarding hardware and software 

inventories, current transaction volumes, expected levels of service, and 

customization requirements.34

Gartner also encourages organizations to use the vendor selection process 

to gain an understanding of the experience of the bidding contractors and 

their relationships with subcontractors and to match the contractors’ 

services to user requirements and the specific account team assigned.35 If 

this is not done, an agency may overestimate the contractor’s experience 

and capabilities. For example, officials from one agency told us that 

because the winning bidder was a “world class organization,” it assumed 

that the contractor had “world class” expertise in areas such as testing. The 

agency later found that this was not always the case.

Once the winning bidder is chosen, it is important to negotiate a contract 

that provides a solid foundation for the working relationship between the 

agency and its contractor by setting the expectations of service levels, 

delivery of essential services, and continuous improvement. This includes 

establishing appropriate performance metrics to measure and reward or 

penalize contractor performance. Defining appropriate metrics and related 

penalties and incentives can be challenging. For example, NASA and 

Treasury have reassessed or are in the process of reassessing the 

performance metrics in their seat management contracts because of 

concerns regarding their adequacy. In particular, four NASA organizations 

34Gartner, Inc., Is Your Organization Ready for Seat Management?, Research Note #DF-09-

2729 (October 4, 1999).

35Gartner, Inc., Seat Management: Look Beyond the Prime Vendors, Research Note #DF-07-

9093 (May 10, 1999). 
Page 29 GAO-02-329 Desktop Outsourcing

reported that the metrics in the ODIN contract were inadequate, 

incomplete, and/or did not provide sufficient incentive to the contractor. 

One organization stated that the metrics were complex and cumbersome, 

whereas another noted that metrics applicable to e-mail and other 

enterprise services were not adequate to ensure acceptable service 

performance and adequate capacity for service growth. NASA has 

recognized these problems and has made changes in its follow-on seat 

management contracts pertaining to the payment provisions associated 

with achieving the performance metrics. However, the private-sector firm 

that performed a postimplementation review of the NASA ODIN program 

recommended that the agency take additional action, including initiating a 

full review of the metrics in the contract.

The following are examples of practices that agencies and/or private-sector 

organizations implemented, or suggested should be implemented, in the 

solicitation and contract award area:

• Provide potential bidders with critical requirements information. 

Agencies and private-sector organizations made various suggestions 

related to providing information to prospective bidders. For example, 

the Peace Corps, DLA, and a contractor stated that issuing draft 

requirements to obtain comments and questions proved useful. 

Moreover, this contractor stated that the agency’s decision to provide 

the service levels that specified the required levels and types of service 

to the bidders before awarding the contract allowed them to structure 

and price their offers to satisfy these levels. In another case, the Peace 

Corps and its contractor both agreed that the preaward site visits that 

the agency sponsored helped potential vendors better understand the 

environment in which they would be working.

• Consider requiring oral presentations. DLA and the Peace Corps noted 

that requiring competing contractors to provide oral presentations 

clarified the bidders’ written material and allowed the agency to better 

understand the bidders’ management approach, respectively. DLA also 

videotaped these sessions, which it later used to confirm contractor 

representations.

• Use relevant performance metrics and related incentives and penalties 

in contracts. Agencies and private-sector organizations alike reported 

that the structuring of the performance metrics and related incentives 

and penalties in the contract was critical. For example, the Managed 

Services Shared Interest Group stated that the performance 
Page 30 GAO-02-329 Desktop Outsourcing

requirements should define the work in measurable, mission-related 

terms and that the performance standards should be tied to the 

requirements. The Giga Information Group provided the following 

examples of areas in which bonus payments can be structured in 

desktop outsourcing: (1) procurement, in which the contractor is 

provided incentives to reduce the purchase price of equipment that are 

tied to its overall repair history to avoid situations in which inferior 

equipment is chosen; (2) uptime or meantime between failure, in which 

incentive payments are tied directly to service costs or service quality; 

and (3) service-level improvement, in which incentives are used to 

motivate the contractor to invest in methodologies, technologies, and 

processes that improve the services provided to the end user without 

substantially increasing the associated costs.36 In addition, the Giga 

Information Group noted that companies should consider penalties 

structured around these same areas. Our November 2001 report on the 

outsourcing of IT services also provides specific examples of leading 

commercial practices related to performance requirements.37

• Consider incentives related to the transition period. The master ODIN 

contract provides for the payment of bonuses related to contractor 

performance during the transition period. Officials from another agency 

that did not include transition bonuses in its seat management contract 

stated that they wished they had included an incentive related to the 

transition period in its contract.

Strong Program and 

Contract Management Is 

Key to Success

Since the agency is ultimately responsible for ensuring that services are 

provided and users’ needs are met, a key to the successful implementation 

of seat management is program and contract management. While much of 

this responsibility is defined by the terms of the contract, market 

conditions may change, and an arrangement that was once advantageous 

may become less so over time. Therefore, it is important for an 

organization to monitor service levels internally as well as to maintain an 

external view of the performance of other providers in its peer group. 

Gartner recommends having a person or group manage the contractor in a

36See footnote 32.

37GAO-02-214. 
Page 31 GAO-02-329 Desktop Outsourcing

way that fits seamlessly into the overall IT service model.38 Specifically, 

according to Gartner, designated staff members, including representatives 

from IT operations, business units, and procurement, need to be assigned 

to manage the contractor and establish service-level metrics. The need for 

dedicated federal personnel to manage the program and contractor was 

also cited as important by NASA, GSA, ATF, and DLA officials. Also 

important is that an agency implement a process to validate the 

information being provided by the contractor to ensure that it is accurate. 

For example, the contracting officer for the Department of State’s seat 

management contract stated that she rejected an inventory report issued by 

the agency’s contractor because it contained names of nonexistent users 

and duplicate records.

The necessity for strong program and contract management was 

demonstrated by GSA’s decision not to continue with its seat management 

implementation. In this case, according to the Federal Technology Service’s 

CIO, GSA attempted to manage its seat management program centrally 

while also allowing each of its services and field locations to develop 

different service-level agreements and define drastically different desktop 

requirements. As a result, according to GSA and contractor officials, the 

contract terms did not match the actual agency implementation. In 

addition, GSA did not adhere to the implementation schedule or the 

service-level mix it had agreed upon with its contractor. Moreover, even 

though the contractor was responsible for asset management under the 

GSA seat management contract, the agency’s Federal Technology Service’s 

CIO stated that GSA had difficulty obtaining accurate information from the 

contractor in terms of the number, type, and costs of these assets when 

arranging to transfer ownership of these assets from the contractor to GSA. 

According to the project manager for the GSA contractor, this was due, at 

least in part, to actions by users, such as moving equipment without 

authorization.

Examples of practices that agencies and/or private-sector organizations 

implemented, or suggested should be implemented, in the program and 

contract management area are as follows:

• Benchmark contractor performance. NASA and CMS used an 

independent contractor to perform market surveys quarterly or 

biannually and to test original equipment manufacturers’ products in 

38See footnote 30.
Page 32 GAO-02-329 Desktop Outsourcing

order to benchmark the IT equipment proposed by the seat management 

contractor. In addition, DLA plans to annually benchmark its users’ 

satisfaction level through the use of surveys. Agency use of 

benchmarking is consistent with our research of leading commercial 

practices for outsourcing of IT services, which found that periodic 

benchmarking allows an organization to ascertain whether it is still 

obtaining good value from its provider.

• Use service-level agreements. The use of service-level agreements was 

cited as a critical practice by both agencies and contractors. For 

example, a contractor noted that its service-level agreements with 

Treasury’s Departmental Offices were a critical success factor because 

they established a specific understanding between the contractor and 

the agency in which customer expectations were realistic and in concert 

with the IT and support services the contractor must deliver. In addition, 

Treasury, two contractors, and the Managed Services Shared Interest 

Group noted that it is important to periodically review the service-level 

agreements to ensure that they are still appropriate.

• Ensure that services are provided. In January 2001, NASA’s Office of 

Space Flight issued a plan outlining a strategy for managing its four 

ODIN contracts, including (1) observing contractor processes and 

procedures; (2) sampling items for review (such as desktop hardware 

and software and trouble tickets); (3) conducting audits using 

checklists; and (4) assessing contractor-generated data (such as asset 

tracking and performance-related data). 

Agency/Contractor 

Partnerships Are Vital to 

Success

Agencies and contractors often noted that it is vital that seat management 

be approached as a partnership, which can be realized by working to 

establish and achieve common goals. In addition, they cited the importance 

of establishing an environment of mutual trust so that issues and potential 

conflicts can be resolved more easily. For example, CMS emphasized the 

importance of an agency’s developing a strong working relationship with its 

seat management contractor that involves mutual trust, noting that 

flexibility and shared goals are keys to success. The need for 

agency/contractor partnerships is consistent with our research of 

commercial practices, which found that aligning client and provider 

objectives in a partnership is key to building consensus and is imperative to 

establishing early trust among all stakeholders. For this alignment to occur, 

the client and provider must work together to establish common project 

goals beyond objectives stated in the request for proposal. Both sides must 
Page 33 GAO-02-329 Desktop Outsourcing

recognize and understand each other’s underlying motives and strive to 

achieve established expectations. Developing a productive 

agency/contractor relationship is not always easy. For example, even 

though the ODIN master contract has been in place since mid-1998, in 

November 2001, a NASA consultant noted that a true partnership between 

the agency and its contractors had not been realized, although some 

progress had been made. NASA has since established a working group that 

comprises both agency and contractor representatives to address this 

matter.

The following are examples of practices that agencies and/or private-sector 

organizations implemented, or suggested should be implemented, to 

develop and nurture agency/contractor partnerships: 

• Develop a trusting relationship with the seat management contractor. 

A NASA consultant’s recommendation to the Goddard Space Flight 

Center was that the center and its vendor build institutional and 

personal relationships and develop a formal conflict-resolution process 

using government and contractor staff. In responding to a draft of this 

report, NASA noted that the Goddard Space Flight Center had 

established a partnering arrangement with its seat management 

contractor and developed a conflict resolution process.

• Consider including the contractor in agency IT planning. One agency 

suggested including the contractor in strategic and tactical planning, 

such as enabling the contractor to provide input into future standards 

and policies. 

• Hold agency/contractor meetings. A seat management contractor 

recommended the approach taken by one agency of holding periodic 

off-site meetings to discuss issues and establish mutually agreed-upon 

priorities.

Establishing Effective 

Communication Among 

Various Entities Is Critical

When the IT service provider is outside of the entity, as it is in the case of 

seat management, disconnects between organizations are more likely; thus, 

processes to facilitate good communication are critical. Indeed, most of the 

entities we reviewed cited communication among the seat management 

contractor, the agency program office, users, and/or other agency 

contractors as critical to the success of seat management. For example, (1) 

the Managed Services Shared Interest Group stated that stakeholders and 

executives should be kept informed of progress “early and often,” (2) 
Page 34 GAO-02-329 Desktop Outsourcing

various NASA centers and two contractors emphasized the need to provide 

proactive user outreach and manage user expectations, and (3) three 

agencies and one contractor noted the importance of communication 

among the various contractors that an agency might use for related 

services. Continuous communication throughout the seat-management life 

cycle is also important. For example, according to Gartner, communication 

is a critical part of both the evaluation and implementation processes of 

seat management.39

Without effective communication, an agency’s seat management initiative 

can encounter problems. For example, GSA’s Federal Technology Service’s 

CIO noted that the agency did not take enough steps to market the seat 

management program throughout the agency; consequently, users of 

desktop services neither understood nor liked the changes that this 

approach entailed. Inadequate user outreach was also cited as a problem at 

NASA. For example, a consultant to the Goddard Space Flight Center noted 

that customer satisfaction requires a high degree of openness and 

cooperation among ODIN representatives, the ODIN project office, and the 

vendor, which was not occurring. Indeed, the consultant found that among 

users there was a perception that “no one listens or cares.” 

Examples of practices that agencies and/or private-sector organizations 

implemented, or suggested should be implemented, in the communications 

area are as follows:

• Market seat management within the agency. Various approaches to 

marketing seat management to users were cited, including the 

sponsorship of “town hall meetings” and technology days or the 

distribution of written materials. In terms of the type of information to 

be provided to users, GSA’s seat management program office noted that 

it is important that users be educated about the benefits of seat 

management, the changes they may expect, and the procedures for 

using the new service.

• Consider the seat management contractor’s relationship to other 

service providers. A NASA consultant recommended that the Goddard 

Space Flight Center identify all service providers that interface with or 

whose activities or responsibilities overlap with the seat management 

contractor and define how they will work together. Similarly, four 

39See footnote 34. 
Page 35 GAO-02-329 Desktop Outsourcing

agencies, a contractor, and the participants in a GSA-supported seatmanagement lessons learned workshop suggested that the seat 

management contractor establish formal agreements with other agency 

contractors. The contractor noted that such an agreement is especially 

important when the other agency contractor can affect the seat 

management vendor’s ability to meet the service-level agreements. In 

addition, within about 3 months of contract award, CMS signed a 

memorandum of understanding with its seat management contractor 

and facilities contractor that set forth the responsibilities of all three 

organizations.

Conclusions The agencies we reviewed implemented seat management for a variety of 

reasons, including to (1) improve their IT management, (2) improve enduser support and productivity, and (3) obtain new or upgrade current 

technology. In addition, these agencies reported a variety of 

accomplishments resulting from implementing seat management, such as 

improved asset management and end-user support. However, they have not 

performed the analyses necessary to validate the overall results of this 

approach. Specifically, the agencies performed limited or, in some cases, no 

analyses of costs and benefits before implementing seat management and 

have not routinely monitored all actual costs or benefits. As a result, these 

agencies lack vital data to demonstrate actual investment results. Without 

these data, it is difficult to determine whether the benefits of seat 

management outweigh its costs and risks. Moreover, this lack of 

monitoring could impair the agencies’ ability to justify and implement 

future seat management investments. These agencies, and others 

considering future seat management investments, could benefit from the 

myriad lessons learned by organizations that have implemented seat 

management, such as the need for thorough preparation and planning, 

agency commitment, program and contract management, and continual 

communication. By applying the lessons learned in these critical areas and 

others, agencies considering seat management could more effectively plan 

their activities and reduce the risks associated with implementing such a 

relatively new concept.

Recommendations To determine to what extent their current seat management programs have 

achieved positive results, we recommend that the secretary of the treasury; 

administrators for the National Aeronautics and Space Administration and 

Centers for Medicare and Medicaid Services; and directors of the Peace 
Page 36 GAO-02-329 Desktop Outsourcing

Corps, Bureau of Alcohol, Tobacco and Firearms, and Defense Logistics 

Agency each routinely monitor all actual seat management costs and 

benefits. 

To provide for adequate justification of any future seat management 

investments, we recommend that the secretary of the treasury; 

administrators for the National Aeronautics and Space Administration and 

Centers for Medicare and Medicaid Services; and directors of the Peace 

Corps, Bureau of Alcohol, Tobacco and Firearms, and Defense Logistics 

Agency each ensure that existing federal policy and guidance for 

information technology investments be followed when considering 

investments in information-technology-service outsourcing. Specifically, 

for future seat management investments, we recommend that these 

agencies

• baseline the current costs of the service being outsourced, including the 

cost of internal agency operations;

• perform an analysis of expected costs and benefits;

• perform an analysis of risks, including developing plans to mitigate risks 

identified;

• monitor actual costs and benefits as a basis for results accountability; 

and 

• implement, to the extent feasible, the lessons learned that were 

identified in this report.

Agency Comments and 

Our Evaluation

We received written comments on a draft of this report from Treasury’s 

Departmental Offices and ATF, the Peace Corps, the Department of 

Defense, GSA, and NASA. Three agencies agreed with the findings or 

recommendations in the report, two did not indicate whether they agreed 

or disagreed, and NASA supported many of the findings but disagreed with 

portions of the report. We also requested comments from the Centers for 

Medicare and Medicaid Services, but none were provided.

The comments provided by Treasury’s Departmental Offices and ATF, the 

Peace Corps, Defense, and GSA varied in scope and detail. Specifically, 
Page 37 GAO-02-329 Desktop Outsourcing

• Treasury’s acting director, Customer Service Infrastructure and 

Operations, Office of the Chief Information Officer, stated that 

Treasury’s Departmental Offices has implemented, or is in the process of 

implementing, our recommendations. Treasury also offered clarifying 

comments that we incorporated into the report, as appropriate. The 

comments from Treasury are reproduced in appendix IV.

• The director of ATF stated that its Office of Science and Technology had 

reviewed the report and had no comments at this time. ATF’s written 

response is reproduced in appendix V.

• The director of the Peace Corps did not address whether the agency 

agreed or disagreed with the findings or recommendations in the report, 

but offered clarifying comments that we incorporated into the report, as 

appropriate. The comments from the Peace Corps are reproduced in 

appendix VI.

• Defense’s deputy assistant secretary of defense (deputy CIO) stated that 

the department generally concurs with the recommendations in the 

report. Defense also included technical corrections that we 

incorporated into the report, as appropriate. The comments from 

Defense are reproduced in appendix VII.

• GSA’s chief information officer concurred with the findings in the report. 

The comments from GSA are reproduced in appendix VIII.

Although NASA supported many of the findings, it disagreed with portions 

of the report. Specifically, NASA did not agree with our assessment that (1) 

its up-front cost analysis was not sufficient; (2) it did not track its internal 

seat management costs, citing its tracking of the full-time-equivalents 

associated with seat management; and (3) it did not adequately track 

benefits.

We disagree with these NASA comments. First, the problems with NASA’s 

up-front cost analysis were cited by the contractor the agency employed to 

conduct a postimplementation review. The report prepared by the 

contractor asserted that it was impossible to determine whether the agency 

is saving money with seat management because of the lack of a 

comprehensive pre-seat-management baseline. Second, while important, 

monitoring of full-time-equivalents does not provide the agency with a 

complete picture of internal costs associated with the implementation of 

seat management. As NASA officials acknowledged during the exit 
Page 38 GAO-02-329 Desktop Outsourcing

conference, the agency does not track the full costs of seat management, 

which would include internal cost items such as overhead and salaries and 

benefits. Finally, NASA’s efforts to track program benefits are not complete. 

Specifically, while NASA’s quarterly reports and postimplementation review 

address some of the agency’s expected seat management benefits, other 

expected benefits, such as potential improved staff productivity and 

efficiency, were not addressed. NASA also provided technical comments 

that we have incorporated in this report, as appropriate. NASA’s written 

comments, along with our responses, are reproduced in appendix IX.

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report for 30 days from the 

date of this letter. At that time, we will send copies to the chairman and 

ranking minority member, Senate Committee on Governmental Affairs; 

chairman and ranking minority member, House Committee on Government 

Reform, ranking minority member, Subcommittee on Technology and 

Procurement Policy, House Committee on Government Reform; and other 

interested congressional committees. We are also sending copies to the 

secretary of the treasury; administrators for the National Aeronautics and 

Space Administration and Centers for Medicare and Medicaid Services; and 

directors of the Peace Corps, Bureau of Alcohol, Tobacco and Firearms, 

Defense Logistics Agency, and the Office of Management and Budget; and 

other interested parties. We will also make copies available to others upon 

request.

If you have any questions on matters discussed in this report, please 

contact me at (202) 512-6257 or by e-mail at mcclured@gao.gov. Other 

contacts and key contributors to this report are listed in appendix X.

Sincerely yours, 

David L. McClure

Director, Information Technology Management
Page 39 GAO-02-329 Desktop Outsourcing

Appendix I

Information on Seat Management Contracts as Apendxies

of December 31, 2001, Awarded under the 

NASA ODIN Master Contract ApendxiI

Dollars in thousands

Agency/

Location Services identified in the contractsa

Reported

estimated

contract

amountb Estimated benefits

National Aeronautics 

and Space 

Administration’s 

(NASA)/

Ames Research 

Center

Application/Database, file storage, 

general-purpose desktop, maintenance 

only, scientific and engineering desktop, 

and World Wide Web seats

$16,014 Estimated benefits are the same for all contracts 

awarded by NASA’s centers and are described 

in the original business case for Outsourcing 

Desktop Initiative for NASA (ODIN), as follows:

• divesting the day-to-day management of 

noncore information technology (IT) functions;

• improved management of assets and their 

configuration;

• improved technology refreshment;

• improved interoperability;

• improved standardization;

• a consistent agencywide desktop strategy;

• simplified procurement, contractor, and budget 

management processes;

• transfer risk from the government to the 

commercial sector;

• potential increases in user efficiency and 

productivity;

• better use of civil service personnel previously 

employed in desktop support; and

• access to greater information technology 

expertise.

NASA/

Dryden Research 

Center

Application/Database, file storage, 

general-purpose desktop, maintenance 

only, scientific and engineering desktop, 

and World Wide Web seats

21,216 Same as above.

NASA/

Glenn Research 

Center

Application/Database, file storage, 

general-purpose desktop, maintenance 

only, scientific and engineering desktop, 

and World Wide Web seats

44,074 Same as above.

NASA/

Langley Research 

Center

Application/Database, cellular phone, 

facsimile, file storage, general-purpose 

desktop, local-area network, local video, 

maintenance only, network-attached 

device, remote communications, scientific 

and engineering desktop, telephone, and 

World Wide Web seats

51,083 Same as above.
Appendix I

Information on Seat Management Contracts 

as of December 31, 2001, Awarded under the 

NASA ODIN Master Contract

Page 40 GAO-02-329 Desktop Outsourcing

NASA/

Goddard Space Flight 

Center

Application/Database, facsimile, file 

storage, general-purpose desktop, localarea network, scientific and engineering 

computer, maintenance only, network 

attached device, and World Wide Web 

and remote communications seats

20,005c Same as above.

NASA/

Headquarters 

Administrative radio, 

application/database, cellular phone, 

computational server, facsimile, file 

storage, general-purpose desktop, localarea network, local video, maintenance 

only, meeting place conferencing, public 

address, remote communications, 

scientific and engineering desktop, 

telephone, and World Wide Web seats

20,190 Same as above.

NASA/

Johnson Space 

Center

Application/Database, cellular phone, 

facsimile, general-purpose desktop, local 

video, remote communications, scientific 

and engineering desktop, telephone, and 

World Wide Web seats

180,721 Same as above.

NASA/

Kennedy Space 

Center

Application/Database, cellular phone, 

facsimile, general-purpose desktop, local 

video, remote communications, scientific 

and engineering desktop, telephone, and 

World Wide Web seats

65,170 Same as above.

NASA/ Marshall 

Space Flight Center 

Application/Database, cellular phone, 

facsimile, general-purpose desktop, local 

video, remote communications, scientific 

and engineering desktop, telephone, and 

World Wide Web seats

100,187 Same as above.

NASA/

Stennis Space Center 

Application/Database, cellular phone, 

facsimile, general-purpose desktop, local 

video, remote communications, scientific 

and engineering desktop, telephone, and 

World Wide Web seats

30,396 Same as above.

(Continued From Previous Page)

Dollars in thousands

Agency/

Location Services identified in the contractsa

Reported

estimated

contract

amountb Estimated benefits
Appendix I

Information on Seat Management Contracts 

as of December 31, 2001, Awarded under the 

NASA ODIN Master Contract

Page 41 GAO-02-329 Desktop Outsourcing

a

In addition to the individual categories of seat services acquired by each of the NASA implementing 

entities and CMS, the NASA ODIN contract allows for acquiring other hardware, software, and 

services through a catalog service offered by the seat management contractors as well as a special 

order process.

b

We asked the agencies to provide us with the total estimated costs through the completion date of the 

current delivery order.

c

The reported estimated contract amount for the Goddard Space Flight Center reflects the amount 

estimated through the end of its original delivery order. As of January 30, Goddard had not signed a 

follow-on delivery order. According to the Goddard delivery-order contracting officer, until this follow-on 

delivery order is signed, Goddard has agreed to pay the contractor the amount of the monthly invoice 

(generally about $600,000) plus 30 percent. 

Source: GAO, based on information provided by the agencies. We did not verify this information.

Centers for Medicare 

and Medicaid 

Services (CMS)

General-purpose desktop seats, asset 

management, and engineering services

25,647 • Avoidance of costs incurred from theft or loss 

of desktop computing assets.

• Reduced costs of license compliance.

• Avoidance of costs for duplicate computer 

equipment.

• Cost savings over purchased equipment.

• Cost savings from consolidation of contracts.

• Improved user productivity.

• Improved responsiveness at the user level.

• Increased end-user satisfaction.

• Compliance with Year 2000 requirements.

• Improved mission effectiveness.

• Reduced risks associated with Year 2000 

readiness.

• Improved morale.

• Redirected staffing responsibilities.

(Continued From Previous Page)

Dollars in thousands

Agency/

Location Services identified in the contractsa

Reported

estimated

contract

amountb Estimated benefits
Page 42 GAO-02-329 Desktop Outsourcing

Appendix II

Information on Seat Management Contracts as 

of December 31, 2001, Awarded under the 

GSA Seat Management Master Contract ApendxiI

Dollars in thousands

Agency

Services identified in 

the contractsa

Reported estimated

contract amountb Estimated benefits

Department of the 

Treasury’s 

Departmental 

Offices 

Asset management, 

commercial information 

services management, 

desktop/portable 

computers, help desk, 

local- and wide-areanetwork servers, 

network printers, and 

voice/telephone 

administration

$114,732 • Ensure the continued reliability and availability of existing and 

planned IT systems, equipment, services, and data.

• Provide for access to private-sector technical expertise, staff 

support, management experience, and corporate capabilities.

• Acquire an operational IT platform that results in a positive 

return on investment. 

• Provide for a single point of contact for IT operations.

• Increase user satisfaction with IT solutions.

U.S. Air Force 

Special 

Operations 

Forces/

Aeronautical 

System Center 

System Program 

Office at WrightPatterson Air 

Force Base

Asset management, 

desktop/portable 

computer, help desk, 

local- and wide-areanetwork servers, 

network printing, 

peripheral device, and 

software (including 

custom applications) 

services 

7,266 • Ability to establish and sustain effective and efficient life-cycle 

support for IT operations.

• Single point of contact.

• Access to private-sector expertise regarding the latest 

available technologies.

• Migration to a self-contained network.

• Paperless acquisition office environment.

• Cost savings from potential future expansion of seat 

management.

• Ability of staff to focus efforts on mission needs. 

Department of 

State/Office of 

Foreign Building 

Operations 

Asset management, 

classified network, 

desktop/portable 

computers, local-areanetwork servers, and 

network printers

48,139 • Ability to establish and sustain effective and efficient managed 

life-cycle support of the office’s distributed computing 

environment with a single point of contact.

Federal Highway 

Administration

Asset management, 

desktop/portable 

computer, help desk, 

local-area-network 

server, network printing, 

programming, 

software/software 

maintenance, and 

infrastructure 

management services

150,000 • Ability to establish and sustain effective and efficient managed 

life-cycle support of a pilot project on distributed computing 

with a single point of contact.

• Achieving high-quality, reliable, and responsive levels of 

service.

• More easily achieving agencywide technology transfers 

through an integrated and uniform processing environment.

• Obtaining technology upgrades at regular intervals.

• Reduced asset maintenance and management 

responsibilities.

• Achieving greater contracting efficiency.

• Consolidation of diverse product and support service 

requirements.

• More efficient use of resources resulting from a consolidated 

internal infrastructure and support environment. 
Appendix II

Information on Seat Management Contracts 

as of December 31, 2001, Awarded under the 

GSA Seat Management Master Contract

Page 43 GAO-02-329 Desktop Outsourcing

Note: Two other organizations—the General Services Administration (GSA) and the District of 

Columbia Housing Authority—issued task orders under the GSA seat-management master contract, 

which they let expire.

U.S. Army/Center 

for Substance 

Abuse Programs

Asset management, 

desktop/portable 

computer, help desk, 

Internet, local-areanetwork servers, 

network printing, and 

World Wide Web 

management services

3,058 • Implementation of comprehensive and integrated desktop and 

local-area-network management services.

• Freeing agency personnel from the burden of maintaining and 

updating desktop resources, services, and training so that they 

can refocus their efforts on the core mission.

• Having a single point of contact. 

• Achieving the goal of acquiring distributed computing services 

seamlessly and efficiently.

Department of 

Housing and 

Urban 

Development/ 

Office of Inspector 

General 

Asset management, 

desktop/portable 

computers, help desk, 

local- and wide-areanetwork servers, 

network printers, and 

virtual private network 

services

48,300 • Obtain a secure network.

• Acquire applications to support the agency’s audit and 

investigation missions.

• Easier technology transfers through an integrated and uniform 

processing environment.

• Technology upgrades at regular intervals so the agency can 

benefit from new and improved technological improvements.

• Freedom from maintaining and managing capital assets and 

refocusing staff on the office’s mission.

• Greater contracting efficiency through consolidation of diverse 

requirements.

• More efficient use of resources resulting from a consolidated 

internal infrastructure and support environment.

Peace Corps Asset management, 

desktop/portable 

computer, help desk, 

local- and wide-areanetwork servers, 

network printing, off-site 

storage, and training 

services

30,045 • Migration to a different technology environment.

• Easier technology transfers through an integrated and uniform 

processing environment.

• Technology upgrades at regular intervals.

• Freedom from having to maintain and manage capital assets. 

• Greater contracting efficiency and a decrease in contract 

management functions by consolidating diverse product and 

support service requirements.

• More efficient use of resources through a consolidated internal 

infrastructure and support environment. 

Nuclear 

Regulatory 

Commission

Integrated infrastructure 

management, asset 

management, help 

desk, maintenance, 

development/ 

integration, and 

contingency operations

80,288 • Desktop and network refreshment to reduce maintenance 

costs and maintain a high level of service availability.

• Streamlined integrated desktop refreshment strategy.

• A single focal point for distributed computing support.

• Obtain a single operating system.

• Enhanced help-desk support through access to subject-matter 

experts.

• Defined and managed level of service delivery.

• High level of customer satisfaction.

• Quicker and more efficient access for the purchase of 

peripheral equipment and software through the use of an online catalog.

• Cost avoidance.

(Continued From Previous Page)

Dollars in thousands

Agency

Services identified in 

the contractsa

Reported estimated

contract amountb Estimated benefits
Appendix II

Information on Seat Management Contracts 

as of December 31, 2001, Awarded under the 

GSA Seat Management Master Contract

Page 44 GAO-02-329 Desktop Outsourcing

a

In addition to the bundled seat management services shown, the GSA seat-management master 

contract allows agencies to purchase catalog orders.

b

We asked the agencies to provide us with the total estimated costs through the completion date of the 

current task order. Accordingly, the amounts provided assumed that all option years would be 

exercised.

Source: GAO, based on information provided by the agencies. We did not verify this information.
Page 45 GAO-02-329 Desktop Outsourcing

Appendix III

Scope and Methodology ApendxiI

To evaluate agencies’ approaches to the seat-management outsourcing 

concept, we selected six agencies for review. Specifically, as agreed with 

your office, we chose two agencies each that were using the General 

Services Administration’s (GSA) seat management contract, NASA’s ODIN 

contract, and GSA’s Federal Supply Service (FSS) Schedule 70 contracts. In 

selecting the agencies, we chose those whose seat management contract 

had been awarded more than 1 year before our review to ensure that the 

agencies had time to adjust to the use of seat management and whose 

contract included at least 500 seats. Accordingly, we selected the 

Department of the Treasury’s Departmental Offices and the Peace Corps, 

which use the GSA seat-management master contract; NASA and CMS, 

which use the NASA ODIN master contract; and the Defense Logistics 

Agency (DLA) and Treasury’s Bureau of Alcohol, Tobacco and Firearms 

(ATF), which use GSA’s FSS Schedule 70 contracts. 

To determine these agencies’ rationales for using the seat management 

alternative, whether they achieved estimated costs and benefits, and how 

well they managed associated risks, we reviewed and analyzed documents 

related to each agency’s decision to implement seat management and how 

it managed the program. For example, we reviewed business cases; 

program and implementation plans; and analyses of costs, benefits, and 

risks. We also assessed whether these documents followed Office of 

Management and Budget (OMB)40 and our41 guidelines. In addition, to 

determine whether the six agencies had implemented contracts that 

protect the government, we evaluated their seat management contracts to 

determine whether they adequately addressed the issues of (1) quality 

assurance, (2) termination rights, and (3) rights to supplied hardware and 

software at the end of contract performance. We also interviewed agency 

officials, including chief information officers (CIO) and seat-management 

program and contract officials.

40Office of Management and Budget, Circular A-130, Management of Federal Information 

Resources (November 30, 2000); Circular A-11, Part 3, Planning, Budgeting, and 

Acquisition of Capital Assets (July 2001); and Evaluating Information Technology 

Investments: A Practical Guide (November 1, 1995).

41U.S. General Accounting Office, Information Technology Investment Management: A 

Framework for Assessing and Improving Process Maturity, GAO/AIMD-10.1.23, Exposure 

Draft (Washington, D.C.: May 2000) and Assessing Risks and Returns: A Guide for 

Evaluating Federal Agencies’ IT Investment Decision-making, GAO/AIMD-10.1.13 

(Washington, D.C.: February 1997).
Appendix III

Scope and Methodology

Page 46 GAO-02-329 Desktop Outsourcing

To identify lessons learned, we reviewed applicable documentation and 

interviewed officials from the six agencies and their contractors, and 

reviewed applicable external and internal studies. We also conducted 

interviews with GSA officials, including the agency CIO and the CIOs for 

FSS and the Federal Technology Service, and the program manager for the 

governmentwide seat management contract. We also reviewed documents 

relating to GSA’s decision not to exercise the option to extend its seat 

management contract. In addition, we obtained lessons learned from other 

organizations, such as the Industry Advisory Council’s Managed Services 

Shared Interest Group and leading private research firms Gartner, Inc., and 

the Giga Information Group, Inc. 

To identify the agencies using the GSA and NASA governmentwide seat 

management contracts, we obtained a list of these agencies from GSA and 

NASA. We contacted each of these agencies to obtain the services being 

provided, the estimated contract amounts, and estimated benefits. We also 

reviewed contracts and other documents provided by each of the agencies 

but did not verify the data provided. 

We performed our work at the headquarters offices of ATF, GSA, NASA, the 

Peace Corps, and the Department of the Treasury located in Washington, 

D.C.; at DLA headquarters in Ft. Belvoir, Va.; at CMS headquarters in 

Baltimore, Md.; at the GSA offices located in Falls Church, Va.; and at 

NASA’s Kennedy Space Center in Cape Canaveral, Fla. We conducted our 

review between April 2001 and January 2002 in accordance with generally 

accepted government auditing standards.
Page 47 GAO-02-329 Desktop Outsourcing

Appendix IV

Comments from the Department of the 

Treasury’s Departmental Offices ApendxiIV
Appendix IV

Comments from the Department of the 

Treasury’s Departmental Offices

Page 48 GAO-02-329 Desktop Outsourcing
Appendix IV

Comments from the Department of the 

Treasury’s Departmental Offices

Page 49 GAO-02-329 Desktop Outsourcing
Page 50 GAO-02-329 Desktop Outsourcing

Appendix V

Comments from the Bureau of Alcohol, 

Tobacco and Firearms ApendxiV
Page 51 GAO-02-329 Desktop Outsourcing

Appendix VI

Comments from the Peace Corps ApendxiVI
Appendix VI

Comments from the Peace Corps

Page 52 GAO-02-329 Desktop Outsourcing
Appendix VI

Comments from the Peace Corps

Page 53 GAO-02-329 Desktop Outsourcing
Page 54 GAO-02-329 Desktop Outsourcing

Appendix VII

Comments from the Department of Defense ApendxiVI
Appendix VII

Comments from the Department of Defense

Page 55 GAO-02-329 Desktop Outsourcing
Appendix VII

Comments from the Department of Defense

Page 56 GAO-02-329 Desktop Outsourcing
Page 57 GAO-02-329 Desktop Outsourcing

Appendix VIII

Comments from the General Services 

Administration ApendxiVI
Page 58 GAO-02-329 Desktop Outsourcing

Appendix IX

Comments from the National Aeronautics and 

Space Administration ApendxiIX

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.

See comment 1.

See comment 2.

See comment 3.
Appendix IX

Comments from the National Aeronautics 

and Space Administration

Page 59 GAO-02-329 Desktop Outsourcing

See comment 4.

See comment 5.

See comment 6.
Appendix IX

Comments from the National Aeronautics 

and Space Administration

Page 60 GAO-02-329 Desktop Outsourcing

The following are GAO’s comments on the National Aeronautics and Space 

Administration’s letter dated February 28, 2002.

GAO Comments 1. We disagree that our characterization of NASA’s up-front cost analysis 

is not accurate. For reasons discussed in this report, we do not agree 

that NASA performed sufficient up-front cost analysis. A thorough 

understanding of existing agency IT assets and functions is critical to 

an agency’s ability to select appropriately among alternative ways to 

meet its distributed computing needs, and to ensure the effective 

management of contracts awarded to acquire these services. While we 

acknowledge that performing such an analysis can be challenging, the 

consequences of not doing so are nontrivial. This is clearly illustrated 

by the inability of a contractor employed by NASA to determine 

whether the agency is saving money with seat management because of 

the lack of a comprehensive pre-seat-management baseline. Also, as 

discussed in this report and our IT investment management guidance to 

agencies,42 we agree that cost represents only one element of a 

complete preinvestment analysis. Other considerations include an 

evaluation of expected benefits and risks. 

2. We disagree that our characterization of NASA’s tracking of internal 

seat costs is incorrect. We note in this report that NASA tracks 

contractor costs and the number of staff associated with the 

management of its seat management program. While important, the 

monitoring of full-time-equivalents does not provide the agency with a 

complete picture of internal costs associated with the implementation 

of seat management. Moreover, as NASA officials acknowledged during 

the exit conference, the agency does not track the full internal costs of 

seat management, which would include cost items such as overhead 

and salaries and benefits. This is critical since the internal costs to 

manage seat management can be substantial. For example, NASA’s 

Kennedy Space Center reported that its salaries and benefits to manage 

the Office of Space Flight’s four seat-management implementations in 

July 2001 were about $146,000. 

42U.S. General Accounting Office, Information Technology Investment Management: A 

Framework for Assessing and Improving Process Maturity, GAO/AIMD-10.1.23, Exposure 

Draft (Washington, D.C.: May 2000) and Assessing Risks and Returns: A Guide for 

Evaluating Federal Agencies’ IT Investment Decision-making, GAO/AIMD-10.1.13 

(Washington, D.C.: February 1997). 
Appendix IX

Comments from the National Aeronautics 

and Space Administration

Page 61 GAO-02-329 Desktop Outsourcing

3. We do not agree that NASA routinely monitors the actual overall 

benefits of its seat management program. Tracking of actual benefits is 

a critical aspect of accountability in that it answers the question of 

whether expected cost savings and other qualitative and quantitative 

benefits are being achieved. NASA’s seat management business case 

documented 11 program goals, but neither the agency’s quarterly 

reporting process nor the ODIN postimplementation review fully 

addresses whether these goals have been achieved. In particular, the 

performance measures included in the quarterly reports focus on 

certain contractor performance metrics (e.g., service delivery and 

availability) and the average seat costs for general-purpose desktop 

computing seats. As we noted in this report, while this type of tracking 

can be an indicator of whether certain types of benefits are being 

achieved, such metrics do not fully address whether the overall costs 

and benefits of the seat management program are being met. NASA’s 

quarterly reports do not contain performance measures that address 

estimated benefits such as potential increases in user efficiency and 

productivity and improved staff focus on mission-related activities. 

With respect to NASA’s postimplementation review, the contractor that 

performed the review addressed whether NASA achieved certain types 

of benefits, such as cost savings and standardization, but did not 

address other expected program benefits, such as potential increases in 

user productivity and efficiency. Nevertheless, we agree that this 

postimplementation review was a good first step, which, if followed up 

by subsequent reviews that address all expected benefits of the NASA 

seat management program, would address our concerns in this area.

4. We modified our report to clarify the terms of the NASA master 

contract.

5. See comment 3.

6. We modified our report to recognize NASA’s initiatives.
Page 62 GAO-02-329 Desktop Outsourcing

Appendix X

 GAO Contact and Staff Acknowledgments ApendxiX

GAO Contact Linda J. Lambert, (202) 512-9556

Acknowledgments Harold Brumm, Peggy A. Hegg, James C. Houtz, Barbarol J. James, and 

Frank Maguire made key contributions to this report.

(310414)
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