Conversion:

A Costly, Disruptive Process That Must Be Considered When Buying Computers

FGMSD-80-35: Published: Jun 3, 1980. Publicly Released: Jun 11, 1980.

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The objectives of Federal procurement policy are to obtain the best prices for goods and services and give all responsible vendors an opportunity to compete. The policy requires competitive acquisition to the extent practicable. However, competitive procurement of computers has been complicated by the lack of clear and concise procurement policy on the treatment of conversion costs in evaluating vendor proposals and difficulties in estimating these costs. When replacing a computer system, an agency must choose between: (1) buying a compatible computer from the same manufacturer, thereby denying other manufacturers an opportunity to compete; or (2) holding a competitive procurement and possibly facing substantial effort, high costs, and operational disruption to convert its application software and change over to the new equipment. In addition to software conversion costs, an agency can spend substantial amounts to retrain its personnel, operate both the old and new computers during the conversion, and modify the computer facility to house both the old and new computers during this period. However, GAO examined six competitive computer procurements involving conversions and concluded that even though conversion costs are frequently substantial, changing to a different brand can be less costly on a life cycle basis.

GAO adjusted the costs used in selecting the winning vendors by including appropriate conversion costs and correcting for significant underestimates. Conversion costs considered in the six competitive procurements varied significantly from case to case, and each installation had underestimated the cost and time necessary to convert its application software to the replacement system. A primary cause of poor conversion cost estimating is that adequate data have not been collected on the experiences of installations that have converted. The problems found by GAO pointed out the need for guidance to agencies as to what conversion costs should be considered in evaluating proposals and for better conversion cost estimating techniques. The General Services Administration (GSA) has drafted regulations calling for consistent treatment of conversion costs and announced the establishment of a support center which will provide technical assistance to help agencies make better estimates and improve conversion management. In the cases reviewed, the lack of adequate planning contributed to the disruption and higher costs. An agency must carefully develop a conversion strategy and plan before initiating its procurement action. Finally, conversion costs and disruption can be reduced by placing greater emphasis on developing better quality application software in the first place.

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