with FPMR 101-32.3. If funds are not available, the Federal agency may request use of the ADP Fund as provided in paragraph 9.

8. GSA approval. The request for use and the conditions of use of the ADP Fund for the acquisition of exchange/ sale ADPE must be approved by GSA prior to the transaction.

9. Conditions for use of the ADP Fund. a. A Federal agency may seek use of the ADP Fund if it determines that replacement is economically advisable and can certify that:

(1) FMC 74-5, FPMR 101-32.403, and FPMR Temporary Regulation E-42 have been complied with.

(2) The agency does not have funds programed for this purpose nor can it reprogram funds for this purpose.

(3) It cannot divert funds planned for other ADPE procurements with lesser rates of return, if any, for this purpose. (See GSA Bulletin FPMR E146 for determining rate of return.)

(4) The proposed procurement of a new system is consistent with the agency's presently authorized programs, and the need for the ADPE has been concurred in by OMB. (For purposes of this paragraph, a "new system" is defined as any acquisition other than purchase of presently installed ADPE or the purchase for replacement of presently installed ADPE with like equipment.

b. When the procurement action involves purchase of like equipment to replace installed systems, a study shall be made to determine if there is a continued economic justification for inhouse ADPE as opposed to alternate sources such as the use of other agency equipment or commercial service bureaus. Agency studies should be consistent with the guidelines of OMB Circular A-76. As required, GSA will forward the agency certification to OMB.

10. Acquisition of exchange/sale ADPE through the ADP Fund. In followup to a telephone reservation (see FPMR 101-32.305) on exchange/sale ADP Fund equipment proposed to be acquired through the ADP Fund, the requesting agency shall submit a letter of intent to the General Services Administration (CDP), Washington, D.C.

20405. This letter shall include the projected period of equipment usage; the requested terms of reimbursement (for example, quarterly reimbursement for 3 years); the agency point-ofcontact (with address and telephone number); and the shipping address, instructions, and fund citations for transportation and ADP fund reimbursement. In addition, there shall be certifications which specify the Federal agency's compliance with the conditions listed in paragraph 9, above.

11. Effect on other issuances. This regulation supplements the policies in FPMR 101-32.3, FPMR 101-32.4, and FPR 1-4.11.

12. Agency comments. Comments concerning the effect or impact of this regulation on agency operations or programs should be submitted to General Services Administration (CPSB), Washington, D.C. 20405, on or before July 1, 1977.

JUNE 6, 1977.

ROBERT T. GRIFFIN, Acting Administrator.

[Temporary Regulation E-49, Supplement 1]

FEDERAL PROPERTY MANAGEMENT REGULATIONS

To: Heads of Federal agencies; Subject: Acquisition of exchange/sale automatic data processing equipment (ADPE) through the ADP Fund.

1. Purpose. This supplement extends the expiration date of FPMR Temporary Regulation E-49 to November 30, 1978.

2. Effective date. This regulation is effective April 30, 1978.

3. Expiration date. This regulation expires November 30, 1978.

4. Explanation of change. The expiration date shown in paragraph 3 of FPMR Temporary Regulation E-49 is revised to read November 30, 1978. Additional time is required to complete

2. Effective date. This regulation is effective upon publication in the FEDERAL REGISTER.

3. Expiration date. This regulation expires October 31, 1978.

4. Applicability. The provisions of this regulation apply to all Federal agencies as defined in FPMR 10132.301-2.

5. Background. a. GSA is not receiving reports of excess ADPE sufficiently in advance of the scheduled release date to allow proper excess screening and allocation prior to discontinuance by the holding activity. Frequently, GSA receives excess ADPE reports after the equipment has been disconnected, the maintenance discontinued, and/or the equipment warehoused.

b. Current regulations require that the holding agency report the equipment to GSA, at least 90 days before the anticipated release date determined by the holding agency.

c. Most Federal agencies have maintenance contracts to keep the equipment in effective operating condition. However, once the equipment is determined to be of no further use to the holding agency, maintenance contracts are canceled. When a lapse in contractual maintenance coverage occurs, the Government has, in effect, relieved the contractor of the responsibility for maintaining the equipment

in acceptable operating condition. Further, equipment is frequently being warehoused, sometimes for several years, prior to excess reporting. This results in unnecessary expenditures of funds by other Federal agencies that are leasing similar equipment. It also causes extremely high refurbishment costs to make the equipment again eligible for a maintenance contract. Effective ADP resources management planning by Federal agencies can greatly diminish this waste of Government funds and resources.

6. Reporting procedures. a. FPMR 101-32.4702 requires that ADPE be reported as excess by the holding agency at least 90 calendar days in advance of the anticipated release date. To ensure economic reutilization, this ADPE should be reported to GSA while the ADPE is in use and under maintenance. Thereby, relocation between Federal agencies can then be accomplished without a lapse in contractual maintenance coverage.

b. Agencies that fail to report excess ADPE prior to warehousing and/or prior to discontinuing the maintenance contract will be responsible for any resultant refurbishment costs necessary to make the ADPE again eligible for a maintenance contract.

7. Comments. Comments may be submitted to the General Services Administration (CPSB), Washington, D.C. 20405, on or about January 16, 1977. All comments will be carefully considered prior to codification in FPMR 101-32.

8. Assistance. Further information concerning this regulation may be obtained from the General Services Administration's Office of Automated Data Management Services; local and FTS telephone number is 566-1284.

9. Effect on other issuance. This regulation supplements the policies in FPMR 101-32.3 and 101-32.4702.

ROBERT T. GRIFFIN, Acting Administrator of General Services.

NOVEMBER 2, 1977.

(1) Leased and full lease costs are paid by the Government under one or more contracts; or

(2) Purchased by the contractor for the account of the Government or title will pass to the Government.

(b) ADPE, software, maintenance, ADP related services and supplies affected by the policies stated herein are defined in Appendix A. Specific exclusions to the policies stated herein are: (1) Items of ADPE that are specially designed (not configured) and/or when physically incorporated as a part of a tactical weapon or space system or manufactured for the Government under a developmental contract; or

(2) Software that is specially developed in support of systems described in paragraph b(1) of this section.

§ 101-35.205 Definitions.

(See glossary of terms-Appendix A.) § 101-35.206 Policies and procedures.

(a) Documenting the determination of need for acquiring ADP. Determination of need shall be preceded by and be based upon the results of well documented general systems and/or feasibility studies for any acquisitions wherein the anticipated purchase price will exceed $100,000 or where the anticipated monthly rental will exceed $2,500. Below this dollar level, agency procurement files should be documented to include appropriate management justification and approval. In either instance, documentation must be adequate to indicate that:

(1) Functions or processes for which the ADPE is to be used are essential and are readily adaptable to automation;

(2) Work load and data processing requirements have been revalidated to determine if a reduction of nonmission-type work can be effected;

(3) Action has been taken to determine the possibility of improving the performance of existing data processing facilities through interim upgrade or system modifications, rescheduling, software changes, improved work center procedures, or extended shift operations; and

(4) Any new systems, procedures, and methods to be employed in per

forming the proposed functions or processes have been designed to achieve the highest practicable degree of effectiveness and operational economy.

(b) Acquisition decisions. It is the general policy of Government to rely on the private sector for its goods and services except where such action is not in the national interest. This basic guidance is contained in OMB Circular A-76, revised dated June 13, 1977, subject: "Policies for Acquiring Commercial or Industrial Products and Services for Government Use." The decision to establish or augment an inGovernment ADD facility or activity must be preceded by a comparative cost analysis to verify that a commercial ADP services approach is not more appropriate.

However, to ensure maximum benefit from current Government investment in ADP resources where excess or idle capacity is available, sharing of already installed/available Government ADPE, software or ADP related services, or use of excess Governmentowned equipment has priority status where such resource can meet the required ADP capability economically and efficiently.

(c) Competitive acquisitions. (1) Data systems specifications, equipment performance requirements specifications, and other specifications shall be designed to ensure free and open competition and equal opportunity and appropriate consideration to all responsive and responsible suppliers, including manufacturers, leasing companies and third party vendors. These specifications shall be applicable as follows:

(i) Data systems specifications which tend to promote full and free competition are preferred for initial system acquisitions and modifications of equipment on hand.

(ii) Equipment performance requirements specifications are preferred for ADPE replacement actions and may be used for initial system acquisitions and modifications of equipment on hand, provided they are designed to promote competition to the maximum practicable extent.

(iii) Specifications which are a combination of data systems specifications and equipment performance requirements specifications are permissible, provided that such a combination is necessary to adequately describe the Government's requirement. All of these specifications must be consistent with FPMR, FPR (where applicable) and thereafter agency procurement policies and practices.

(2) Two prime factors shall be considered in the selection of equipment. (i) Its capability to fulfill the system specifications; and

(ii) Its overall costs, in terms of acquisition, preparation for use, and operation.

The term "overall costs," as used in this subparagraph, shall be interpreted to include but not limited to such cost elements as personnel, purchase price or rental, maintenance of purchased equipment, site preparation and installation, programing, training, and conversion costs. In considering conversion costs, care must be taken to avoid undue biases or predispositions which are prejudicial to free and open competition. Conversion costs may be considered only to the extent that such costs can be shown to be clearly essential to continuing agency needs taking into account the probable economic life of the resources to be converted; that due consideration has been given to the possibility of redesigning current systems and software to take advantage of enhanced system capabilities or eliminating obsolete or nonstandard software in conflict with applicable Federal Information Processing Standards; and that the bases for such conversion costs are clearly delineated in the solicitation documentation.

(3) Any acquisition without a competitive evaluation is in effect a solesource procurement and is subject to the applicable FPR's and FPMR's governing procurement. The mere availability of equipment within the existing vendor's product line which is compatible with installed equipment and which may offer a better cost-performance ratio is not a sufficient basis for deviating from paragraphs (c) (1) and (2), of this section. Any asserted cost

burden associated with conversion of existing systems to other vendor product lines is not normally considered the conclusive factor in justifying such sole-source or single product-line procurements. However, where potential conversion costs and/or operational impact are substantial and the requesting agency regards them as essential in a determination of "best interests of the Government", such conversion factors should be clearly and fully justified and documented.

(4) If ADPE for an interim upgrade is acquired noncompetitively then the agency shall commit itself to replace the complete ADPE complex (or some logical and substantial subset thereof) of which the interim equipment forms a part. Such acquisition shall be based on new specifications and shall be accomplished through a competitive procurement within 2 years of the initial acquisition. The agency and GSA may mutually agree to a longer period of time when there are unusual circumstances.

(d) Determinations of least cost alternative. (1) The method of acquiring ADPE, software, maintenance, ADP related services, and supplies shall be determined after careful consideration of the relative merits of all methods available; i.e., purchase, lease, or leasewith-option-to-purchase, or any other legally acceptable method. The method chosen shall be that which offers the greatest advantage to the Government under the circumstances which pertain to each situation.

(2) A comparative cost analysis of the alternative method of acquisition shall be performed to determine which method shall provide the Government with the lowest overall cost (price and other factors considered), over the total systems life. Federal agencies shall consider the residual value of the ADPE and/or the total system to the Federal Government as a factor in the comparative cost analysis for any plan wherein title to the equipment would be vested in the Government at any point during the contract period; i.e., purchase, lease with purchase option, or lease to ownership plan. Residual value is the value that would accrue to the Government beyond the stated