Decades of federal government ‘cost-plus’ contracts increase taxpayer costs 2, 3, 4+ times

guest blog by “Captains America” (bio below)

The biggest issue with federal government purchasing is the use of cost-plus contracts. This should be an issue that most people agree with regardless of their political leanings.

Cost-plus contracts are a way for government acquisition professionals to pass on research and development risks to the taxpayers. The acquisition professionals cause this risk to taxpayers through two different actions: 1. Writing poor system requirements and 2. Not contracting for the proper lab work, experimentation, and prototyping for new technologies. Essentially, programs are going forward for full funding without the proper engineering and scientific effort being conducted to refine new designs and catch unforeseen problems with new technologies. There are programs funded that contain requirements for technologies that don’t even exist in a proven prototype.

For some programs that are funded by Congress, there are several high risk technology requirements that are rolled into the same project, compounding risk to taxpayers. While the contractors experiment, fail, and experiment again to try and meet those requirements, the bills keep piling up.

The Space Based Infrared System (SBIRS) – High, which provides infrared sensors in space as part of the missile launch alert system, is an example of what happens when small scale sensor prototypes aren’t developed slowly in a laboratory research and development environment, and then introduced in stages (first as a small test sensor on an operational satellite and later as its own acquisition program for full-scale development). The program experienced massive cost overruns on the order of 400%; see Budget Busters:  The USA’s SBIRS – High Missile Warning Satellites.

Poor system requirements writing continues because in many cases acquisition professionals are just taking various inputs from organizations, consolidating the requirements, and pressing forward with a new program without understanding where to cut and shape requirements in order to bound risks. It’s an ignorance of what’s state-of-the-art practice in industry today versus what isn’t feasible to accomplish in the near-term.

The cost overruns and schedule slips include naval ships and aircraft. The Navy can’t even purchase small ships designed for coastal operations without having costs more than double; see Cost overruns have military facing ‘train wreck,’ McCain says.

Federal government acquisition professionals in most cases are also the last group you want managing new technology efforts. In most cases, they have never personally designed anything high-tech, never led lab experimentation, and never built a system prototype. In addition, they are motivated to create the most expensive and massive programs possible. It’s a contest in the government to try and secure as much of the overall budget pie as possible. Acquisition personnel are promoted based upon the dollar value of the contracts they manage.  The whole personnel system must be changed so that acquisition personnel show in their personnel file how they managed system requirements and system risk instead of rewarding them for managing large dollar value contracts.

There is no reason for federal government offices or their contractor teams to fear any action from Congress because they submitted completely flawed program costs and schedule when introducing a program to Congress. Government employees aren’t fired, and contractors are not blacklisted from contract competition if they fail to deliver on promises. Federal government project managers know the real hurdle is to get a project’s initial approval and funding by Congress. For example, there is a continuing expectation among NASA personnel that projects that fail to meet cost and schedule goals will receive additional funding; see Hubble Psychology Causing NASA Program Cost Overruns?

Congress is motivated to approve and fund these large-dollar-value, high risk programs. Contractors purposefully stage branch locations in key Congressional districts so that the big programs are approved. They are sold as jobs programs to Congressmen, despite the fact that we can create even more profitable jobs in this country if we do a better job of prototyping, research and development, and requirements management. Congressmen are rewarded for looking the other way during one schedule slip and cost overrun after another. Just do a review of which contractors contribute to their campaigns.

We must get Congress to force a change in federal government purchasing (also called acquisitions). For components, types of materials, sensors, software programs, etc. that are new and high risk to develop, a government Research and Development office should be the lead to work with industry and produce a lab prototype that is either small scale or full scale. A second stage prototyping may also be required for some high risk technologies in order to integrate a new component or material into an existing operational system in order to perform additional testing and evolution of the technology. This would allow scientists and engineers the time needed to gain the knowledge required to transform a high risk technology into a moderate risk technology. Congress must stop financing purchasing contracts for complete systems that include several high risk technologies.

The continuous waste of taxpayer dollars on poorly managed space and defense programs should not be allowed to continue. This is a decades-old story now and our do-nothing Congress still hasn’t moved to make prototyping and risk management a must for all federal government acquisitions.

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Bio: Captains America is the pen-name of two decorated US Air Force members. Both now work in the private sector with no ties to government. Expert testimony always has documented facts speak for themselves; Captains America embrace this professionalism.

 

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  • Carl_Herman

    I appreciate “Captains America” for reaching-out to us with documentation from an area of expertise. Part of what we all see required for victory is critical mass of Americans simply speaking the truth of what we see in one area or another.

    We live in an Emperor’s New Clothes-like reality. Enough people pointing and speaking will cause the public to trust their own eyes.

  • unheilig

    Ex military men too ethical to hop aboard the acquisitions gravy train? Congratulations both of you! Excellent article.

    • MCB

      I know that when I decided to leave the military, I choose to be a part of the private sector and sacrificed a TS-SCI security clearance to actually make much less in the private sector rather than tether myself to the MIC and a big defense contractor salary.

      I really do not believe in big, centralized government other than essential services such as education, police, fire and a small military. In fact, I’d like to see our military budget cut by over 50% in a period of 5 to 7 years.

      There is at least 35% unnecessary $$$ overhang due to baseline budgeting that keeps legacy weapon systems on life support decades after their design life has expired where there is no contractor support for a simple $5 replacement part that now costs a $1000 or more for special manufacture.

      Ad nauseum, ad infinitum. 🙂

      • unheilig

        A huge Thank You to you too and all like minded citizens. We have to keep believing that it will make a difference. Absolutely agree about the bloated military budget. Maybe then we’d think twice about starting totally unnecessary wars.
        Thanks again.

        • MCB

          This is also the kind of screw ups that happen too when there is a government controlled monopoly of only 2 or 3 big defense contractors that are running the show. I’m not saying we should have a space industry with 25 contractors bidding, but there should be at 6 – 8 and not just LockMart basically running the show

          JPL Engineers = English System of measurement

          NASA Engineers = Metric System of measurement

          =

          http://www.cnn.com/TECH/space/9909/30/mars.metric.02/

          The STS (i.e. “space shuttle”) was a White Elephant born out of hubris-fueled limitless spending. The Russian manned space program is as good if not better than ours was and at a fraction of the cost.

          We basically halted all R & D on rocket launch motors in the late 1960’s when we had perfected our ICBM fleet. We just kept slapping on old rocket launch motors onto retrofitted ICBM’s to launch satellite payloads into orbit and miraculously had a very high success rate in spite of the lack of technology because of our overall engineering expertise and prowess.

          The Russians never stopped the R & D on their rocket launch motors.

          When our first wave of Air Force officers and Engineers went to Russia for the START Treaty verifications in the mid 1990’s, they marveled at how far advanced the Russian rocket launch motors were. The Russians were at least 20 years ahead of us as the plumbing in their motors was greatly simplified for the better via continual R & D. The Russian Space program is much more advanced and much less expensive than ours from a rocket launch motor standpoint.

          This is yet another egregious example of baseline budgeting carrying a design forward 20+ years past its design life cycle…