Summary: In response to a congressional request, GAO reviewed 28 of the larger Government teleprocessing services contracts representing a broad range of agencies, vendors, and contract types to determine whether there is a Government-wide cost-overrun problem and, if so, what actions could be taken to remedy the situation.
GAO found that cost overruns are a common occurrence in its sample of contracts. Cost overruns were not measurable in the eight sole-source contracts in the sample; however, sole-source contracts are generally not as cost effective as competitive contracts, and replacing them with competitive awards could reduce costs. Agencies underestimate costs for teleprocessing services because of unrepresentative benchmark tests and unbalanced pricing. The combination of an inaccurate workload estimate and unbalanced pricing results in the highest cost overruns. In 1982, the General Services Administration (GSA) incorporated pricing clauses as part of its standard contract provisions to ensure that costs do not increase disproportionately. However, agencies need assistance from GSA in interpreting vendor cost proposals. In over half of the contracts which GAO reviewed, management had not controlled cost by establishing procedures to account for and allocate all costs of data processing to the end users according to the service received. Management also tended to renew contracts through the system life and beyond, even when costs were significantly higher than original evaluations. GAO also found that, if all users paid a small percentage of their monthly invoices into the Automatic Data Processing Revolving Fund, GSA could provide more service in that procurement area.
