[ cross-posted from Zenpundit — a very preliminary salute to James Bennett and Michael Lotus’ new book, with blues harp to match ]
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Okay, I’m a snapper-up of unconsidered trifles, a jackdaw, not the most consistent of readers — but I did stumble upon something…
I’ll admit, I cannot even see how “the actual time and materials cost of the hammer might be $60 a hammer” when its “functional equivalent might cost $20 in a hardware store” — but let’s overlook that 200% markup for a moment, and chew on the rest of this dazzling paragraph from James C. Bennett and Michael J. Lotus, America 3.0: Rebooting American Prosperity in the 21st Century — Why America’s Greatest Days Are Yet to Come
The Department of Defense requires that the labor time and materials used in building defense items on a “time and materials” basis, which is the great majority of all such items, be documented in excruciating detail. The costs of doing this are themselves allowed as expenses, so that the government ultimately pays for the costs of this proof. Therefore, when lurid accounts of $600 hammers procured by the Pentagon surface in the press, what is actually happening is a hammer whose functional equivalent might cost $20 in a hardware store is purchased in the Pentagon system, the actual time and materials cost of the hammer might be $60, with an additional $540 in documentation costs to ensure that the government is not being over ¬charged for the item.
I admit, I am not Kafka.
But if that isn’t a snake biting its own tail arrangement, I don’t know what is.
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What can I say?
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Interesting, btw — I’ll bet there’s a story behind the decision to switch book covers from the one proposed earlier (at the top of the post, left) to the one the book now carries (right)!
Charles, if Kafka wrote about Pentagon procurement it would be socialist realism. As to the initial cover, we always hated the Caucasian family in the kitchen, so that was a placeholder. The farm scene was nice, but the publisher could not get rights to it or something, so we came up with the farmer plowing, which goes nicely with the idea of A1.0 as the world of muscle power, human and animal.
If you really want to get to the bottom of why the Pentagon is so screwed up when it comes to cost control and procurement, you really have to go to the source: Congress.
One reason those eye-watering tool prices happen is the Byzantine manner in which Congress appropriates money. There have been some cases where the Air Force or Army has gone to the manufacturer, and said “Boeing/Lockheed/Whoever, develop for us a maintenance system for this piece of equipment.”. The manufacturer then goes out and does the requisite work, and develops the system, which ain’t cheap–Take a look at the maintenance management and manual systems for commercial aircraft as a comparison. This system includes a whole lot of intangible items, which don’t fit the definitions of what the military is allowed to buy. So, what winds up happening is that the Air Force or Army gets a set of tools and equipment, plus the development of the manuals and procedures, and the only thing they are allowed to pay for is the physical part of the program. And, at some point, a value has to be set on those individual items. Bang, $600.00 hammer when it’s procured as a part of a maintenance “system”. You’re not actually paying for the hammer, you’re paying for being told you need it, and how to use it. Congress will pay for the tangible asset, but they won’t pay for the intangible one. So, that $600.00 hammer is an artifact of the accounting procedures mandated by Congress.
Another stupid thing they do is tell the services “Hey, we don’t want you maintaining inventory. Reduce it.”. Then, the Air Force has to go out (after having sold all the parts they had stocked for such eventualities as “surplus”), and have Boeing produce X number of widgets like toilet seats for the B-52. Said toilet seat was a standard part, once upon a time, but is now unique. And, if you were to try to substitute a toilet seat from a Boeing 777, a.) It likely wouldn’t fit, and b.) You’d still have the problem of it not being certified for use in a military aircraft, especially one designed to carry nuclear weapons. So, either way, the Air Force is screwed. They can’t maintain stocks of old parts, and they can’t cut corners on replacements, so away we go into the stratosphere with the prices. Again, blame Congress–They mandated all this crap, and the accretion of such mandates over the years is what causes nine-tenths of the costs.
There are people out there who made millions, if not billions, by buying up all the stock of spare parts when the idiots under Clinton and Gore made them sell the stocks off. And, they warehoused those parts, and turned right around and sold them back to the government at hugely inflated prices when the government had to go out and buy more parts for these old weapons systems. Interestingly, many of these characters were reputed to be well-connected Democrat supporters of the Clinton/Gore administration…
Don’t blame the Pentagon, in other words: Blame the real source of the problem, the idiots in Congress who can’t keep track of what they’ve been telling the armed forces to do for the last two hundred years.
I would be willing to bet that I could cut actual billions out of the military budget with a few simple accounting fixes. The number one fix for doing this? End the idiotic policy of treating unit budgets for money, ammunition, and other expendables as a “use it or lose it” proposition. That idiocy goes back to the early days of the Republic, when Congress essentially said: “Well, if you didn’t spend it or need it this year, you obviously won’t need it next year, either… So, we’ll cut that out of your budget.”. This pernicious policy has been in effect for literal centuries, and the end-of-fiscal-year idiocy is damn near ingrained into the culture. I spent 25 years on active duty, and every year, regular as clockwork, you’d see massive expenditures of money and training ammunition every single September, all in the name of keeping that funding or ammo allocation in existence for the next year, when we “really might need it…”. A commander can actually be relieved for not expending his full allocation, and it’s all due to Congressional mandates. Say, for example, that the brigade is jerked out of the training plan it was conducting, and sent off to do something like fight forest fires at Yellowstone. If the ammunition they didn’t use in FY 88 wasn’t expended in FY 88, they’d lose it for FY 89, and on into the future. So, if the brigade commander in FY 88 lost that ammo allocation, he’d screw over every successive commander after him. Soooo… If he did that, the division commander would justifiably relieve his ass for doing that. The repercussions are huge.
I actually lived that scenario. We’d been in a prep cycle for going to the National Training Center that was supposed to culminate in a huge exercise in September. Cue the Yellowstone fires, and we got snapped up and sent there for “a week, or so…” which turned into a full month, eventually. About the time we were supposed to be going home, the word came back that we absolutely had to do something about that ammo allocation. The solution? Have the rear detachment draw the ammo at Fort Lewis before October 1, and then transport it to Yakima Firing Center and hold it in a field ammunition holding area until we got back, whereupon we sent over just enough people to fire and expend all that training ammunition in a massive cluster-fark of what Army slang terms an “Expendex”, short for “Expenditure Exercise”. Just about zero training value was derived from all that ammo, which probably cost several million dollars, and all in the name of satisfying mindless accounting procedures dreamed up by Congress back in the f**king 19th Century. And, never, ever revised. This kind of crap goes on every single damn year, wartime or peacetime, year in, and year out.
The procurement phenomenon is quite real. A friend of a friend (on Bix or NLZero) told of having a niche duct-tape product that someone in the DOD wanted to buy. But his tiny company was completely unwilling to go through all the paperwork agony to get qualified as a supplier under FAR. So some third party (I assume someone who already did business with the DOD) agreed to be the middleman, bought the duct tape, marked it up hugely to cover all the additional admin expenses, and sold it to Uncle Sam.
BTW, if someone named Kirk tells you something… pay attention!
Why was the order of the pictures changed on the cover? I would think the left pictures 1-2-3 makes more sense than the right’s 3-2-1
The older is the foundation for the new. The top picture has blue sky, it bleeds to the edge of the page. It looks nicer.
The final cover is much better than the earlier version. We spent a lot of effort on it.
The publisher did a terrific job getting the final composition to look very nice.
Indeed, you are very fortunate to have a publisher who allows an author or authors to have much of a say in the design…