Dec 31 2009

A Deal Feds Can Love

The Exchange/Sale Program lets agencies safely and legally dispose of IT—and get a little something back for their trouble.

Photo: John Emerson
"I equate the market for used IT to melting ice: As time goes by, there's going to be less value in it and less of a market for it," AnythingIT's David Bernstein says.

Rebates, free-printer-and-modem-with-purchase promotions, cash-back packages, bonus in-store cards—all the goodies offered on PC purchases today—are legally off the table for government buyers.

But agencies can get something extra back on their information technology purchases using the government's Exchange/Sale Program. Federally approved companies whisk away unwanted IT equipment, certify the wiping even of hard drives containing top-secret data and resell it, donate it or recycle it in accordance with Environmental Protection Agency requirements. At the end of the process, agencies get certifications required by the Office of Management and Budget and a credit to buy new IT gear.

The measure lowers overall IT procurement costs, and updated inventory data helps meet asset management and planning goals of the President's Management Agenda. The inventory data also can improve help-desk and change management.

The guidelines for the Exchange/Sale Program are spelled out in Federal Management Regulation 102-39.

"The program is an opportunity for agencies to obtain new assets as a result of the sale or exchange of existing assets, whether those assets are obsolete or inadequate or broken or what have you," says Robert Holcombe, director of personal property management in the General Services Administration's Office of Governmentwide Policy.

Savings Down the Road

About 25 agencies report using the program, although returns on IT for most civilian agencies are small, says Rick Bender, a GSA policy analyst. On one such deal last year, the Veterans Affairs Department reported a return of about 1 percent on original purchase price, and one Interior Department deal netted the agency roughly 3 percent.

But cost avoidance can add significantly to the transaction's value. Stored IT that has any useful life left loses up to 10 percent of its value each month, according to the Aberdeen Group, an IT consultant in Boston.

"I equate the market for used IT to melting ice: As time goes by, there's going to be less value in it and less of a market for it," says David Bernstein, president of asset recovery company AnythingIT of Fort Lee, N.J.

The Aberdeen Group estimates "that any organization annually removing as few as 3,000 PCs can save $1 million per year in unnecessary storage and disposal costs by implementing an effective asset disposition program."

A chief issue is planning, says Frances O'Brien, a research director in the equipment asset management group at Gartner of Stamford, Conn.

"Most organizations don't have a good plan to dispose of IT equipment," she says. Those that plan IT asset life cycles cut the cost per asset by as much as 30 percent in the first year and up to 10 percent annually over the next five years, O'Brien says.

With asset disposal costing between $30 and $120 per PC, depending on the services performed, organizations "cannot turn a blind eye to the ramifications of asset disposal," she says.

Help Wanted

"Gartner recommends outsourcing equipment disposal," O'Brien says. For most organizations, "this is not a core competency and is better handled by a skilled provider. Generally speaking, they have better capabilities and will perform the tasks at a lesser cost than if performed internally."

Agencies today have many choices of providers: The market, once dominated by small regional asset recovery companies, now includes PC-makers such as Hewlett-Packard of Palo Alto, Calif., and Itronix of Spokane, Wash.

"We're not pushing it," GSA's Holcombe says of the program. "It's up to the individual agencies to determine if exchange/sale or excessing and surplusing is the right route for them. But agencies should consider the Exchange/Sale Program before they go to excessing and surplusing, if they still have a need for the property."

The problem with surplusing or recycling is there's no return to the agencies, says Bernstein, whose company, a small business GSA schedule contractor, partners with CDW Government of Vernon Hills, Ill., for exchange/sale deals. He notes that agencies must also keep in mind they are responsible for making sure the equipment that they surplus is wiped clean of its data.

Where's Your Data?

Make Four Big Piles

If your IT equipment is:

•Less than two years old: Redeploy internally.
•More than two years old: Resell.
•More than 36 months old and working: Donate.
•More than 36 months old and not working: Recycle.

Source: Gartner

One thing no organization wants recycled or reused is its data.

But one British study, by the Information Security Research Group at the University of Glamorgan, found 8 percent of 92 used hard drives it reviewed "contained information about the computer network of the organizations, including server names."

A Massachusetts Institute of Technology study of 129 drives concluded "that the secondary market is awash with confidential information," and notes that in 2002 alone "more than 150 million disk drives were retired from primary service."

"I can tell you some scary stories about equipment ending up where it shouldn't," AnythingIT's Bernstein says. "Like some equipment that was donated and ended up on an Indian reservation with proprietary information on it."

AIT sells many agency discards to South America, where many governments are trying to promote literacy and commerce through the use of technology, Bernstein says. Some equipment is donated to GSA's Computers for Learning Program, which offers PCs and related equipment to schools. HP and AnythingIT have a partnership with the National Cristina Foundation. The Greenwich, Conn., organization channels used equipment to people with disabilities and at-risk students.

PCs that are broken, have missing parts or are too old to be of use are recycled.

The greatest value deriving from use of the Exchange/Sale Program, when it comes to IT equipment, may lie in the audit trail, O'Brien says.

"If you're using an asset management system, you can link [the new data] with what you already have on the equipment to know whether it performed well," O'Brien says. "You can see whether it's time to buy new equipment or dispose of older equipment. Then you use all of that information to plan your maintenance strategy."