

On $400 Hammers, $100 Bolts, and Cost-Plus Contracting - jcnnghm
http://littlebitofcode.com/2010/02/14/on-400-hammers-100-bolts-and-cost-plus-contracting

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timcash
Please provide some more background on why the project was created and the
ultimate goal. Without that I do not really buy your argument as I have also
worked with government contracts (including cost plus) and spent six year in
the US Air Force. The problems are these. (1) Did they really need this system
in the first place? Example: The F22 Raptor a fifth generation multipurpose
fighter. I would argue that we do not really need this system but, sadly the
people I worked for (Air Force Generals) the guys who create the ideas and
sign the contracts did not even think to ask that question. Building another
fighter was a forgone conclusion to them. It was purely about building
something and not about defending against a real threat or even a perceived
future threat. To the guys who run the Air Force (former fighter pilots
primarily) of coarse you need a new plane. (2) Are you building yet another
proprietary system on top of other proprietary systems. Example: JSTARS or the
E8-C built by Northrop. This system collects a bunch of data about movement on
the ground. The problem is Northrop created a proprietary mechanism for
getting the data off of the plane. So now the government has to buy the plane
and the system to get the data. (3) Was there another way to solve the
problem? Example: Microsoft Sharepoint. There are so many sharepoint sites
setup in the DOD it is complete waste. Every single unit thinks they need a
sharepoint site because other units have sharepoint sites. No one is bothering
to ask; hey instead of all setting up our own site why dont we just create a
big repository where everyone can drop there (docs, ppts, xls, pdfs, etc...)
and tag them with the unit they are from. So I would ask did you need this
emails system? Are you perpetuating the problem of continuing to build
proprietary systems? Is there another way to accomplish this task outside of
an email system? Why did you need t1 lines by the way? Now to the Hammer and
the bolt example you give. Instead of building a new bolt for every project
and then having to test it and build spares etc... build a bolt that can be
used on many projects. I have been in these contract meetings. The private
companies intentionally build as many one off solution as possible so we have
no choice but, to keep coming back to them. You say build a company and bid on
contracts. If you work in contracts you know it is not that simple. I would
love to if I had some help navigating the bureaucracy... Again give some more
background on that project if you can.

~~~
jcnnghm
We're talking about two different things. The government decides its
requirements, not the contractor. Essentially, the government says what it
wants, and how you are to deliver it.

For the email example, they said how many servers, how many T1 lines, and how
powerful they all had to be. They also wanted usage logs from the T1's for
capacity planning. The contractor doesn't have input there.

That's essentially the case with the bolts as well. It's in the specification,
the contractor doesn't have the power to say we are going to use these other
bolts because they're standard. Items are specified in a specific way for a
reason, with bolts, it's because those particular bolts absolutely have to
stand up to the rated forces, because they're likely to experience them, with
combat and all.

~~~
timcash
Right so the people creating the contracts are not doing their research. We
need to spend more time thinking about how we do things so we dont pay for the
same thing over and over. We need a way to make the fact that this bolt has
been built public and accessible so if someone needs something similar they
can contact the right folks and ask. Why would they say how many t1 lines are
need and how many servers? That is silly. What if someone could get the same
effect with less power and bandwidth? why wouldn't we use the superior
solution. Again to make your point we would need to know what the ultimate
goal of the system is and determine if indeed that was the only way to solve
the problem. That is the whole point of having competition after all.

~~~
jcnnghm
"We need a way to make the fact that this bolt has been built public and
accessible so if someone needs something similar they can contact the right
folks and ask."

Not really. If you need a bolt that absolutely needs to be able to withstand
the rated forces at the specified size and weight, it needs to be non-
destructively tested. The expensive part isn't the bolt, it's the testing.

You don't want it to be tested when it's the last bolt left in a redundant
pair and it sheers off.

"Why would they say how many t1 lines are need and how many servers? That is
silly. What if someone could get the same effect with less power and
bandwidth?"

Because they did a needs analysis and calculated the probable amount of
bandwidth, and decided that redundancy was necessary as well. This stuff isn't
just a guess, it is based on hard data.

~~~
timcash
Can you provide the analysis? It seems like you are doing some hand waving and
have resolved that fact that this solution was the only solution which I am
skeptical of. Perhaps you can provide the RFP?

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CoreDumpling
As someone who supplies $400 hammers to the government I assure you that $395
of that is the cost of all those man-hours needed to produce all the docs and
ppts needed to explain why they need that hammer, what kind of nails it can
pound, why we built it the way we did, and how it is intended to be used. It's
not nearly as much of a ripoff as most people with an agenda would like to
think.

Your tax dollars hard at work, I suppose.

~~~
gacba
Not all such perversions are justifiable:

[http://www.lessonsoffailure.com/software/military-
software-s...](http://www.lessonsoffailure.com/software/military-software-
sucks/)

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ryanwaggoner
This article would have been a lot better with a bit of context at the
beginning. I vaguely remember hearing something about the "$400 hammer"
contract, but he speaks of "the bolt" and "the hammer" as if we're continuing
a conversation. Otherwise, good article.

~~~
callmeed
Agreed. I vaguely recall some Doonesbury or Bloom County jokes about it in the
eighties.

Apparently there was also a $7,600 coffee maker.

------
rdl
The biggest problem I have with defense contracting is that the people in the
contracting office often are not subject matter experts in what they buy.

This is less true with vehicles, pencils, etc. It is particularly true with
IT. I'm not very familiar with the huge weapons systems purchases -- those are
probably subject to a lot of other factors since there are only a few firms
who can compete.

Part of this is due to the general government skills shortage in IT, but more
that the top IT people tend to remain in operational roles, vs. going over to
contracting.

The problems happen at the requirements phase -- government asking for very
specific terms which exclude functional products, e.g. specifying file
formats, number and type of hardware, etc. Sometimes this is for integration
with existing government equipment, but more often it is because whoever
specified the contract doesn't understand the set of possible solutions. In a
lot of cases, too, a 95% solution that is COTS (and thus has less schedule
risk, lower cost, etc.) is superior to a 100% solution which has to be custom
built.

They HAVE gotten a lot better at this in the 1990s and 2000s. Part of the
problem is an essentially limitless budget.

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kaib
This source article goes into depth on the original hammer issue and contains
more information than the linked article:
[http://www.thefreelibrary.com/The+case+for+the+$435+hammer-a...](http://www.thefreelibrary.com/The+case+for+the+$435+hammer-a04619906)

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nazgulnarsil
the article explains the reasoning behind why this sort of accounting is
allowed. that is not the issue, the issue is the abuse.

~~~
sgk284
I quit working at a huge defense contractor last year (perhaps the largest in
the world?), it's a big one... you know it. Some of the nonsense that they had
going on included but was not limited to charging the government $150/hr at a
rate of 1.5 lines of code per hour. The code that was being written was not
being written by software engineers (it was mechanical engineers, and some
other engineering disciplines, but no one that really knew how to write code)
and was not being tested (integration tests, but not unit tests or anything).

The biggest piece of bullshit that I saw while working there was this: I was
one of the few software engineers on my particular team. My code was more
concise (by a factor of 3.5 on average) and contained an order of magnitude
less bugs than the team's average bugs per sloc. This was expected because I
was one of the few software engineers, it makes sense that my code would be
better than a non-software engineer. I was approached by someone in a position
of authority and told that the work I was doing was great, but I needed to
slow down. I was told "I wasn't earning my value.", which is code speak for
"You're working too fast, and if you slow down we can charge the government
more because we bill by the hour."

I quite last September and haven't looked back.

~~~
nazgulnarsil
these types of stories seem pretty ubiquitous in the public sector, but I
worry that confirmation bias colors perception of it. I wish there was a way
to do a anonymous but rigrous study on it.

~~~
notauser
It's not just the public sector. There are plenty of shady services firms (law
and marketing especially) who work the same way. In those areas the only thing
that mitigates abuse is essentially firm reputation and goodwill between
individuals.

It's hard to design a contract that gives the right incentives to the right
people. Because the government is essentially _banned_ from using goodwill and
reputation as a basis for buying decisions (as it gets called cronyism and/or
the old boys network) they are stuck trying and failing to enumerate a fair
contract instead.

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nradov
Sometimes the Defense department intentionally overpays certain contractors
for cheap items as a means of funding secret, off-budget programs.

~~~
jackowayed
Source?

~~~
chaosmachine
[at the secret government lab]

President Thomas Whitmore: I don't understand, where does all this come from?
How do you get funding for something like this?

Julius Levinson: You don't actually think they spend $20,000 on a hammer,
$30,000 on a toilet seat do you?

<http://www.imdb.com/title/tt0116629/quotes>

------
ralphee
I was with you until the boo-hoo white men are so oppressed bit at the end.
Exactly the opposite analysis of the first part, which is to say going beyond
the soundbite and into the larger context.

~~~
joshon
I totally agree. It all got a little Rush Limbaugh at the end. For some
perspective, the top 5 Government contractors are:

1 Lockheed Martin Corp. $14,983,515,367 2 Boeing Co. $10,838,231,984 3
Northrop Grumman Corp. $9,947,316,207 4 General Dynamics Corp. $6,066,178,545
5 Raytheon Co. $5,942,575,316

Here are the CEOs of those companies...

<http://littlesis.org/person/1931/Robert_J_Stevens>
<http://littlesis.org/person/1418/W_James_McNerney_Jr>
<http://littlesis.org/person/1052/Dr_Ronald_D_Sugar>
<http://littlesis.org/person/2363/Nicholas_D_Chabraja>
[http://www.raytheon.com/ourcompany/rtnwcm/groups/public/docu...](http://www.raytheon.com/ourcompany/rtnwcm/groups/public/documents/image/rtn_leaders_swanson_lg.jpg)

All white men, if anything they should up the affirmative action programs in
my opinion. Oh, and stop spending so much of our money on military and start
putting it into public healthcare and education.

~~~
rdl
There's also preference for small businesses, service related disability,
veteran, etc. on certain contracts. I'd like to see female and minority
preference phased out over time (which it is) due to their success in the
overall marketplace, but at present I can see some benefit to keeping
preference.

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greenlblue
All this is fine and well but it fails to address the fact that the way things
are currently done is not the right way to do things.

