SEC will keep control of its filing system

In its rush to adjourn this month, Congress decided that the Securities and Exchange
Commission should retain authority over who operates the commission's on-line filing
system and to what degree.


SEC reform legislation, one of the final items pushed through the House and Senate
before lawmakers left Washington, calls for a commission review of privatizing the
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.


The SEC plans to issue a solicitation for development of a next-generation EDGAR system
this month. Rep. Jack Fields (R-Texas) at one time sought to hand over all aspects of the
next-generation EDGAR to contractors.


The provision in the reform law, the National Securities Markets Improvement Act of
1996, requires only that SEC report within six months on ways to outsource EDGAR work. By
that time, the SEC might have awarded contracts for the EDGAR successor.


As lawmakers tinkered with other sections of the sweeping legislative package, SEC
officials were prodding House staff for a clear definition of what Fields wanted when he
called for privatizing EDGAR. One House staff member acknowledged that earlier versions of
the bill were rather vague about what privatization meant.


What led Congress simply to direct the SEC to study privatization? Based on public
response, several House and Senate members voiced concern that a privatized system might
restrict or limit free public access to EDGAR filings, the staff member said.


Staff on Field's House Commerce Subcommittee on Telecommunications and Finance called
the new language more ""friendly.'' The staff members said they expect the
clause still will accomplish the goal of reducing program costs because SEC officials have
agreed to give vendors a bigger role in operating the system.


Congressional staff said SEC officials promised that the request for proposals for the
follow-on system will ask bidders to suggest ways to outsource more EDGAR operations.


""The focus of the work has been on preparing an open-ended RFP, which will
allow companies to bid on any aspect that they want to,'' said W. Duncan Wood, who works
for Rep. Dan Frisa (R-N.Y.), a member of the Telecommunications and Finance Subcommittee.


SEC chief information officer Michael E. Bartell said the commission will issue the RFP
before month's end. He refused to discuss the final RFP or the bill, saying,
""We're in procurement mode.''


After Fields promoted his proposal in a report last spring, SEC officials said that
much of the current EDGAR work is handled by contractor BDM International Inc. of McLean,
Va. Agency officials insisted that the commission had to retain ownership of the financial
data in the system, no matter who operates it.


In an announcement last month, the SEC said it would hold a two-phase procurement for
the next-generation EDGAR. During the first part, vendors are being asked for
""conceptual plan to modernize and privatize'' the system.


Based on these initial proposals, the SEC will select vendors to compete for one or
more contracts to develop and operate EDGAR's successor. The commission has not decided
what to call the follow-on system, but EDGAR II is one possibility.


The announcement made it clear that the SEC intends to retain control of the data
captured and processed using EDGAR. SEC said the winning contractor or contractors must
operate the existing system and handle the dissemination subsystems. It is the
dissemination of EDGAR data that figured most prominently in discussions about
privatization.


Contractors already handle much of the EDGAR work including dissemination, but Fields
has suggested that more contractors be involved in this end of the operation. Bartell has
said that outsourcing more of EDGAR always has been an SEC goal.


The back-and-forth with Capitol Hill pushed the SEC's acquisition plans off track. The
commission wanted to have a new contract in place at year's end, when the BDM contract
expires. The award now has been delayed for about six months, and SEC is negotiating with
BDM to extend its contract to cover the interim.



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