[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.