Bargain Bomb Revolutionizes Warfare

Newsday ^ | May 26, 2002 | BILL KACZOR -- Associated Press Writer

[Willie Green]

EGLIN AIR FORCE BASE, Fla. -- Weapons developer Terry Little was explaining plans for a guidance kit that could turn "dumb" bombs into "smart" ones when the Air Force's chief of staff asked about cost.

Caught off guard that day nine years ago, Little put the price tag at $65,000 a copy based on costs for other high-tech munitions.

Gen. Merrill McPeak, now retired, then asked for a cost goal.

"I made up a number right there on the spot of $40,000, which seemed like a nice round number," Little recalled.

[Bogey78O]

So that's a JDAM. I felt so ignorant when people started talking about them because I never knew.

[Paleo Conservative]

So that's a JDAM. I felt so ignorant when people started talking about them because I never knew.

JDAM

[Cicero]

I'll bet the other procurement officers in the Pentagon really HATE this guy!

[nightdriver]

"Many vendors refuse military business because they don't want to put up with the rules and regulations, but that changed with JDAM, Hatcher said."

This IS progress! So many government acquisitions are hindered by superfluous rules and regulations that the paperwork generally outweighs the product. Like a company that is not "qualified" to be a government supplier because thay don't have the requisite number of triplegic martians working for them.

Don't ever blame the vendor because the toilet seat cost over $600 or the claw hammer cost $1200. By the time the vendor got "qualified" to sell to the gubmint, he had to go through a bazillion non-productive hoops.

Here with JDAM, some of the sorry bureaucrats are getting their noses rubbed in the fact that it's a lot cheaper to go down to Ace Hardware and plunk down $20 and walk out with a hammer.

[eno_]

Don't ever blame the vendor because the toilet seat cost over $600 or the claw hammer cost $1200. By the time the vendor got "qualified" to sell to the gubmint, he had to go through a bazillion non-productive hoops.

That's not exactly true. The reason you have $600 hammers is that the Pentagon procurement procedures are a pain in the ass. But those procedures also allow the defense contractor to put all that paperwork into the price of the hammer, and so make a 15% profit margin on the $600. That's a lot better (for the contractor) than making 15% on $6. If the contractors could make a higher profit margin on more cost effective systems, they would make efficient rather than gold-plated systems. But as long as the profit is fixed and low compared to private sector systems - Cisco's profit margin on some routers approaches infinity - you won't get more success stories like JDAM.

[AdA$tra]

Way to go USA!!

I've been to the plant in St. Charles. Very impressive.

Here is a larger question: Will the consolidation of the aerospace industry make things more like this? ...Or will it stifle development by removing the competition factor? Whaddayouthink?

[AdA$tra]

Cisco's profit margin on some routers approaches infinity

I have been buying super-high quality switches from Dell for a third of the price as Cisco's low end stuff. We also have to buy a lot of overpriced low-end Cisco routers to connect former twinax customers to our machine over IP. Why aren't they the most profitable company on Earth? The government should emulate this JDAM procurement method across the spectrum instead of just raising taxes every year.

[DugwayDuke]

The real story behind the $600 hammer is this. The hammer was part of a tool kit for the F-16 that includes some very expensive and special purpose test sets. The allowable overhead charges were allocated equally to each item in the tool kit. Since the allowable charges were just that, allowable, how these charges were allocated did not, in any case, change the price of the tool kit.

What this allocation did was make the hammer relatively expensive while making the test sets a bargin. Ah, you say, let's buy only the test sets. Fine, but the allowable charges remain the same and are re-allocated only to the test sets meaning you don't save squat.

The Pentagon solved this problem by prohibiting the allocation of costs based upon the number of items and prescribed that allowable costs be allocated based upon the price of the item. Means more math, but the price of the tool kit is the same.

The $600 hammer is a great story but it is a story of misrepresentation of facts by a few democratic politicians more intent on slashing the defense budget and bashing Reagan that it was a story on the stupidity of the Pentagon.

[Tennessee_Bob]

Thanks for the good explanation, DugwayDuke. I used to work with the Zero Overprice program when I was in the military. We did everything we could to challenge any suspected overpricing (and actually got a lot of prices lowered).

I was an F-15/F-16 engine mechanic. Some of the special toolkits and test sets we had were extremely expensive. But standardized tooling - normal everyday handtools - the prices were inline or less than what you would pay in the outside world.

[csvset]

Some pics of JDAM testing can be found here.

[DugwayDuke]

You're welcome. It bugs the fire out of me that the $600 hammer is still being represented as an example of waste within DoD. Particularly when the story is used to justify slashing the defense budget. BTW, the $7000 coffee pot was not the kind you buy at Walmart. It was the same one used on the Boeing 747. You hardly ever hear that DoD paid $7000 while Boeing paid about $9500.