Leadership: Stop Picking My Pocket, Please Sir

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February 18, 2011: The head of the U.S. Air Force recently demanded that defense contractors stop the practice of submitting unrealistically low bids for new weapons, and then coming back for more and more money as "unforeseen problems" appear and costs keep escalating and delivery is delayed. Currently, procurement projects are about a third over budget, and most items are late as well. Currently, procurement of weapons and major equipment make up about a third of the defense budget. While this is expected to decline over the next decade, as defense budgets shrink, the problem also extends to upgrades and refurbishment of existing equipment.

The big problem is the decades old contractor practice of deliberately making an unreasonably low estimate of cost when proposing a design. The military goes along with this, in the interest of getting Congress to approve the money. Since Congress has a short memory, the military does not take much heat for this never ending "low ball" planning process.

Actually, it's poor planning in general that causes most of the high costs. It's bad planning by the military, when coming up with the initial design, and bad planning on the part of the few manufacturers that have a monopoly on building certain types of weapons systems. Monopolies do not encourage efficiency. There are many examples of all these bad habits at work. Don't expect any of this to change anytime soon. It's the way things have worked for a long time. Many generals and admirals, members of Congress, and even a few manufacturer executives, have called for reform. But it just doesn't happen, at least not to a large extent.

One encouraging post-Cold War trend has been an increased reluctance to build a lot of a weapon that became extremely expensive. Thus the B-2 bomber, Seawolf submarine, F-22 fighter, Crusader artillery system, Comanche helicopter, and DDG-1000 destroyer all got production cut sharply, or were cancelled, when their budgets went too far out of control. So there's hope yet.

 


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