QUESTIONNAIRES WERE SENT BY THE GAO TO 163 SOFTWARE CONTRACTING FIRMS AND 113 FEDERAL PROJECT OFFICERS TO IDENTIFY PROBLEMS AND POSSIBLE IMPROVEMENTS. ALSO, NINE CASES OF SOFTWARE DEVELOPMENT WERE EXAMINED IN DETAIL. ONLY ONE OF THE NINE YIELDED SOFTWARE THAT COULD BE USED AS DELIVERED, AND ALL NINE CASES EXHIBITED TIME DELAYS AND COST INCREASES. THE GAO FOUND THAT (1) MOST FEDERAL AGENCIES CONTRACT FOR SOFTWARE WITHOUT SPECIFIC GUIDANCE, (2) AGENCIES OVERESTIMATE THE STAGE OF THEIR SYSTEM DEVELOPMENT, AND (3) THEIR PRELIMINARY WORK--E.G., USER REQUIREMENTS ANALYSIS--IS OFTEN INADEQUATE. AS A RESULT, AGENCIES ISSUE INAPPROPRIATE CONTRACTS WITH INADEQUATE CRITERIA. THEY ALSO COMMIT THEMSELVES TO AN ENTIRE DEVELOPMENT PLAN RATHER THAN A PHASED PLAN THAT ALLOWS FOR TESTING AND OTHER FACTORS. ANOTHER PROBLEM IS LACK OF MANAGEMENT THROUGHOUT THE CONTRACT PERIOD, INCLUDING EXCESSIVE CHANGES, FAILURE TO MONITOR THE WORK IN PROGRESS, ETC. GAO RECOMMENDS THAT SPECIFIC GUIDELINES IN THE FOLLOWING AREAS BE ISSUED BY THE SECRETARY OF COMMERCE AND BY THE ADMINISTRATOR OF GENERAL SERVICES: (1) INTERNAL AGENCY MANAGEMENT PRACTICES, (2) CONTRACTS TAILORED TO THE STATE OF SYSTEM DEVELOPMENT, (3) PHASED PLANS, (4) PERFORMANCE SPECIFICATIONS TO BE INCLUDED IN THE CONTRACT, (5) CONTRACTORS' QUALITY ASSURANCE PROGRAMS, (6) DEFINITIONS FOR DOCUMENTATION AND OTHER STANDARDS, AND (7) CONTRACT MANAGEMENT TECHNIQUES. TABLES ARE INCLUDED. AGENCY COMMENTS, A CHECKLIST FOR SOFTWARE DEVELOPMENT CONTRACTING, AND CASE STUDIES ARE APPENDED. (AUTHOR ABSTRACT MODIFIED--RBM)