Skip to comments.Arms makers take on Pentagon's cost cop
Posted on 04/11/2016 8:45:03 AM PDT by drop 50 and fire for effect
Some of the nations leading defense companies are declaring war on a powerful enemy an obscure Pentagon official named Shay Assad who has helped cut more than $500 million from military contracts with his aggressive scrutiny of their costs.
The industrys tactics include blanketing congressional committees with proposals that would make it harder for Assad and his contracting officers to get detailed breakdowns of the companies' expenses, according to documents obtained by POLITICO. But Assad, the Pentagon's pricing director for the past five years, refuses to back down, saying: "We are going to be relentless in pursuing getting the good deal for the taxpayers."
(Excerpt) Read more at politico.com ...
I have yet to decide it this guy is part of the problem or part of the solution.
As the effort of one individual that is highly commendable. As an effort at real reform, it is not even a good start. That's what, one F-35 if we are lucky and can get one for that price?
Can we TRUST Assad?
I spent 45 years in the industry and it is broken in many places.
Shay Assad, nor Ash Carter have approached the needed fixes in an effective way.
Broad brushes and political agendas are not the answer.
As a former contracting officer for the USAF I can tell you first hand that the political interest in contracts down to as low as local base commissary and dining hall bread contracts was intense and every congresscritter wanted to be in the forefront for taking the credit when a constituent got the contract.
It’s like healthcare (even before Obama):
Those who do the ordering, the designing, the producing and the PAYING are unlinked.
The guy who ordered the $700 hammer in the 80s probably never saw the price. The guy who entered the order probably never saw the description.
I mis-pasted the author’s name, it is Ellen Mitchell. My apologies. Can you correct?
FWIW he is a 1972 U.S. Naval Academy Grad.
That nails it. Markets function best when buyer and seller have the info they need to negotiate a rational price.
Our procurement process reduces clarity, both sides’ attempts to rationalize the price are de-synced. The orderer (patient or agency) is not the payer (insurer or financer). The seller has increased admin requirements, frequent changes to customer requirements and wants to guarantee profits.
I personally sometimes wonder if our procurement system isn’t a left over effect from a long term KGB plot to cripple the country in red tape.
I’m all in favor of scrutinizing government expeditures and cutting out the waste. I just wonder when the welfare nation is going to get the same scrutiny the military gets.
“Legally, all companies involved in a sole-source contract with the Defense Department are required to provide pricing data on any subcontractor that provides $750,000 or more in goods and services. For years, however, the Pentagon neglected to push companies on that rule.”
Here are two problems.
First problem. During negotiations, all the primes will provide the subcontractor cost data. After a prime wins the contract, that prime will go back to the subs and renegotiate a better deal. The savings are not passed onto the government.
Second problem. Often the government will solicit bids from multiple contractors but will only receive bids from a single contractor. The government will then ‘deem’ the contract to have been awarded in a “competitive manner” contending the bidding contractor did not know no one else would bid. The government is just too lazy to do it differently.
BTW, we don’t need more contracting rules. We just need competent government employees.
I remember staying up all night in the S-4 (logistics) shop at the close of the fiscal year, creating and entering punch cards (yep) to finish consuming 99.99999% of our battalion’s budget. Spare parts we didn’t need. Trinkets here and there.
And that’s just on the demand side.
The supply side has even more control.
I learned a little lesson at my work a few years ago. The Navy wanted to buy some portable televisions to put on submarines. Just to keep the sailors entertained. Nothing fancy.
But before they could sell their televisions to the Navy, the manufacturer had to bring their television to the lab where I worked. We had to burn it in an oven, collect all the resulting gas and smoke, and analyze it for just about every poison known to man.
I wasn’t an easy analysis. And it wasn’t cheap. But you do NOT want to be trapped on a submarine with poison gas.
So, sometimes the military has good reasons to pay more for things.
Now that is just crazy talk.
1) A weapon system is proposed by a government agency and contractors are forced to bid on the conceptual system as presented. This process frequently excludes any innovative improvements the contractor may have on the design. This results in the technology being developmentally retarded into previous generations of "known" technology rather than using contemporary technology. We were using 386 DX processors on flight control systems when the average geek was using a Pentium II at home.
2) Contractors are forced to bid on a hypothetical design that my not see development into a deployed system within the next decade after the proposal. It locks a contractor into a "crystal ball" guesstimate on what the economy will look like over the length of the program. That automatically drives variances between actual costs and forecasted costs. Of course this is fertile hunting grounds for a sensationalizing media and media seeking politicians.
3) The government mil-specs everything instead of allowing use of off the shelf technology. This takes a Garmin GPS and puts it in a guilded case that is waterproof down to 200 feet but just added weight at 30,000 feet. But, the USAF and US Navy have that one size fits all interchangeability that has worked out so well on the F-111 and now the F-35.
4) The on site government representative (DCAS/DPRO/Dwhatever) is frequently focused on job advancement of government bureaucrats rather than maintaining stable product quality from a contractor. They hit the contractor with some pretty absurd things around review time to get their name visibility for promotion. I have horror stories about his process. We used to predict QDR and Method C storms based on personnel openings in DCAS/DPRO offices.
5) Are there crooked contractors? Surprisingly not at the top tier IMO. Because of the outright complexity of the procurement process most real fraud occurs at the bottom level, the component suppliers and subcontractors are most frequently busted with false certifications of conformance. We have thousands of counterfeit parts cropping up in all areas of our economy. At some point they are certified by the supplier as conforming and genuine. Then these certifications are buried under the blizzards of contractual paperwork daring anyone to discover them. We only see the ones that cause problems. Still, because of Mil-Std-1535, the Prime Contractor is the one who gets the hit and all the bad press. Like dealing with terrorists, the good guys have to be right all the time, the crooks only have to worry about getting caught once.
“The Pentagon Papers” should be required viewing.
Yes you can. I worked in government contracting with the Air Force for 28 years. He is right, he is only requesting information that the government is allowed to get under the Truth in Negotiations Act. Exempting subcontractors would be a disaster because so much government contracting is subcontracted. There are statutory exemptions for small dollar amounts and small percentages. Shay Assad is really good at what he does.
Kind of like spending the last few weeks of September on the firing ranges wasting ammo that you didn’t need. Solely for the purpose of getting it authorized the next year so you can waste it again. rinse and repeat!
Well, when you make it about ammo, it doesn’t really sound all that bad.
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