Effective Management of Computer Leasing Needed To Reduce Government Costs

IMTEC-85-3: Published: Mar 21, 1985. Publicly Released: Mar 21, 1985.

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GAO reported on its examination of federal departments' and agencies' computer leasing practices.

GAO found that federal agencies spent about $1.1 billion to lease automatic data processing (ADP) equipment in fiscal year (FY) 1983. Among the leases that GAO analyzed, costs could have been reduced for up to 90 percent of the components by employing one or more of the available refinancing alternatives. Lease costs could also be reduced by exercising contract options, which change a straight lease to a lease plan, that would result in ownership. Data processing managers at the civilian and defense installations GAO visited had not identified or pursued refinancing alternatives because they lacked the specific management procedures and monetary control policies essential to such operations. Further, agency managers and officials were generally uninformed about certain alternatives. GAO also noted that the General Services Administration (GSA) and the Office of Management and Budget (OMB) have not provided agencies the funding support needed for such unbudgeted purchase opportunities.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: This recommendation was triggered by a request for funding. To date, GSA has not requested such funding and most likely will not do so, since the ADP Fund has been merged into the Information Technology Fund, and the mechanism for requesting fund increases has changed.

    Matter: Congress, when considering future requests to increase the ADP Fund for opportunity buys, should specify that the funds be used exclusively for taking advantage of cost-effective opportunities to buy equipment.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Comments indicate that agency heads directed the evaluations. Actual impact cannot be determined without follow-up work, which will not be undertaken because of more pressing congressional priorities.

    Recommendation: The heads of federal civilian agencies with substantial leasing volume should, to ensure that federal departments and agencies take maximum practical advantage of available refinancing alternatives, require data processing managers to conduct a cost-effectiveness analysis of all existing leases and develop a plan to employ, where appropriate, the refinancing alternatives described in this report.

    Agency Affected: Heads of Federal Agencies

  2. Status: Closed - Not Implemented

    Comments: OMB indicated that it is considering changing information systems guidance to accomplish the intent of this recommendation, but has not specified how or when. To date, action has not been forthcoming.

    Recommendation: The Director, OMB, should require agency heads to confirm, with each annual budget submission, that all of their computer leases have been evaluated for cost-effectiveness and that such leases have been contracted at the most reasonable cost alternative available to the government.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  3. Status: Closed - Implemented

    Comments: GSA instituted rulemaking to change FIRMR and issued guidance to agencies. The actual amount of financial savings cannot be determined without additional audit work.

    Recommendation: The Administrator of General Services, to ensure that the necessary leadership and governmentwide ADP management support are forthcoming, should issue guidelines for agencies in seeking third-party competition and, specifically, in transacting sale/leasebacks.

    Agency Affected: General Services Administration

  4. Status: Closed - Not Implemented

    Comments: OMB did not agree with this recommendation and stated that it does not intend to take action. No follow-up work is scheduled.

    Recommendation: The Director, OMB, should allow agencies to make greater use of the ADP Fund to purchase equipment currently leased uneconomically.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  5. Status: Closed - Implemented

    Comments: GSA instituted a pilot project using changed lease terms. Actual savings cannot be validated without additional audit work.

    Recommendation: The Administrator of General Services, to ensure that the necessary leadership and governmentwide ADP management support are forthcoming, should identify and revise, where it will enhance competition and be otherwise appropriate, those federal contracting practices that the third-party industry believes act as major business impediments.

    Agency Affected: General Services Administration

  6. Status: Closed - Not Implemented

    Comments: Congressional action created the Information Technology Fund as a successor to the ADP Fund, beginning in FY 1987, and specified rules for use of the new Fund in enabling legislation.

    Recommendation: The Administrator of General Services, to ensure that the necessary leadership and governmentwide ADP management support are forthcoming, should institute controls to ensure that the capital in the ADP Fund authorized for opportunity buys is available and used for that purpose unless it can justify to OMB that capital reserved for opportunity buys can be used more effectively for other ADP Fund programs.

    Agency Affected: General Services Administration

  7. Status: Closed - Implemented

    Comments: Agency heads stated that they directed that these actions be taken. Savings cannot be documented without verifying that analyses are actually being performed and documenting the analysis results.

    Recommendation: The heads of federal civilian agencies with substantial leasing volume should, to ensure that federal departments and agencies take maximum practical advantage of available refinancing alternatives, require data processing managers to correct computer equipment inventory and accounting records and maintain them accurately to enable the recurring analysis of computer leases.

    Agency Affected: Heads of Federal Agencies

  8. Status: Closed - Implemented

    Comments: GSA instituted rulemaking to change the Federal Information Resource Management Regulation (FIRMR). Actual impact of the changes cannot be determined without follow-up work, which will not be undertaken because of more pressing congressional priorities.

    Recommendation: The Administrator of General Services should issue regulations requiring all agencies to: (1) perform routine, periodic analyses of computer leases; (2) compare the costs of available refinancing alternatives; and (3) select the most reasonable, cost-effective alternative.

    Agency Affected: General Services Administration

  9. Status: Closed - Not Implemented

    Comments: OMB does not believe that an increase in the Fund is appropriate at this time and stated that it plans no action. No follow-up work is scheduled.

    Recommendation: The Director, OMB, should work with GSA and other federal agencies to determine and request an appropriate level of funding in the ADP Fund to buy out uneconomical leases.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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