IG: DOT data center does not compete

The Transportation Department's inspector general recommends closing the agency's data center within the next two years because it cannot compete with other commercial and federal centers, according to a recently released DOT audit report.

Although the Transportation Administrative Service Center (TASC) Computer Center, which offers data processing and data storage services to government agencies on a fee-for-service basis, has reduced its billing rate by 20 percent over the past 16 months, it still is not competitive in the marketplace, the IG found.

The center's three largest customers - the Coast Guard, the Federal Highway Administration and the Federal Transit Administration - either already have discontinued or plan to discontinue using the center's mainframe data processing services. Although the agencies are satisfied with the center's service, the costs were too high, the IG report said.

"Under the existing circumstances, the prospect of the center providing cost-effective services is unlikely," the IG said in the report, which Congress requested in conference report language accompanying DOT's fiscal 1999 appropriations bill. "As a result, the deputy secretary should direct TASC to discontinue offering its current services within the next two years and instruct the few departmental components that planned to continue to rely on the center to acquire substitute services."

The Washington, D.C.-based center has 64 employees - four government employees and 60 contractor employees - and generated $14.6 million in revenue in fiscal 1998. Closing the center would affect all services offered on the mainframe, which primarily handles data processing services.

According to the IG, the TASC's Computer Center charges twice as much for data processing and six times as much for storage compared with another comparable government center.

Using methodology from Gartner Group, Stamford, Conn., the IG found that the center also runs 31 percent less efficiently than the average industry or government data processing center and 7 percent less efficiently than other government centers, based on its costs, staff and workload data.

DOT declined to comment on the report, saying it is drafting a formal response.

Meanwhile, a study last month by the Logistics Management Institute found that the center can operate cost-effectively and that its mainframe exceeds the minimum capacity level required by the Office of Management Budget. However, the study showed that the center's costs were higher than those in other government and industry centers.

Not only is the TASC center losing business, few agencies appear interested in outsourcing their data centers.

OMB in 1996 directed agencies to consolidate or outsource data center operations, either within government or to private firms, but OMB never put any teeth behind its notice, said Linda Berdine, president of consulting firm Berdine & Associates.

"I'm disappointed that we didn't go as far as we could have in closing some of those inefficient data centers," she said. "The momentum has been lost." Dealing with the Year 2000 issue played a role in diverting agencies' attention away from data center consolidation, she added.

Lack of follow-up on OMB's part may have had a negative impact on the General Services Administration's Virtual Data Center Services contract, which offers data processing services to agencies, according to sources.

However, after a slow start, business is picking up on the contract, said Charles Self, assistant commissioner of GSA's Office of Information Technology Integration. "I think, in terms of the number of task orders, it's less than we expected, but the contract has been successful in terms of dollars awarded," which amounts to several hundred million, he said.

Congress is expected to take up the issue of the TASC data center closure during this year's appropriations debate.

Report language accompanying the fiscal 1999 appropriations bill would have closed the center, but that language was taken out in conference.