9th Marines

This from the March issue of American Legion Magazine:

The Navy's newest supercarrier, USS Gerald R. Ford, will be its most expensive, with costs for the high-tech warship now exceeding $12.9 billion. That includes $2.4 billion in cost over-runs, according to Senator John McCain. A GAO report notes that to stay under cost caps, the Navy planned to defer some work on Ford until after delivery. "This approach obscures visibility into the true cost of the ship and results in delivering a ship that is less complete than initially planned," according to GAO.

My question: What is going on here? Those over-runs are about 25 percent. Are corporations no longer held to ethical standards?

rolech Loc: Louisville, KY

To answer your question, the answer is NO.

robmull Loc: florida

$2,000,000,000.00 is only 1/3 of what Hillary lost, 9th Marines, at the Secretary of State position [she] held for a few years; during B******i. I understand that $6,000,000,000.00 just kinda' disappeared somewhere. Well, hell, that much just fell out of my pocket the other day. Hummmmmmm. I guess that's why the Clintons' were so destitute for so long. Or was that after destitution set-in??? Hard to keep track of all the corruption with OUR government these days; in CHICAGO South. Capone must be proud!!! Talk about "ethical standards."

lpnmajor Loc: Arkansas

Defense contractors have never been held to the same "standards of service" as other corporations. As you know, when most companies "bid" on a contract, they are held to that bid, with substantial penalties incurred for coming in late - or over budget. In fact, many contracts require "completion bonds" to be posted by the winning contractor.

Defense contractors traditionally get a pass on these things, as their work is considered a national defense necessity. Remember the $500 dollar hammers reported years ago, or the $1500 toilet seat for the P3? I think that was in the 80's, but nothing's changed. Defense contracts aren't even bid the same way, as the cost is considered an "educated estimate", mostly as a means of getting the Congress to pay for it.

It should also be no surprise that many officers, nearing retirement, are involved in monitoring these contracts - and wind up working for the companies they had "over seen" immediately after retiring. Senior officers and enlisted personnel gather the same perks and favors as politicians do, sometimes as blatant as offshore accounts that cannot be accessed until after retirement. As long as taxes are paid when the money is accessed, no one cares and sometimes not even then.

The biggest drain on our national treasure is NOT entitlements for citizens, it is the entitlements of greedy defense contractors, greedy politicians and greedy senior military officers. It would be delusional to think that all military officers were honorable and t***hful and adhered to time honored codes of conduct. We know better - and yet - the defense department gets a blank check and a complete pass, that defies common sense.

Rufus Loc: Deep South

:thumbup:

Dummy Boy Loc: Michigan

...have you just awoken from a coma? There isn't a single DOD project that doesn't run into cost overruns, in fact, I would challenge you to determine one that hasn't.

As for instance, since we invaded Iraq, a simple cost/benefit analysis would say that the goal of the war was to end the war, so all the spending that has occurred: is a cost overrun.

The Veteran's Administration is in a cost overrun operation. Cost controls were attempted and the result: dead veterans.

JMHO Loc: Utah

You, don't have a clue about the Defense Contract Industry...oh, you think you do, but in reality you don't. You have heard, or read some left-wing blogs/publications, written by people that are clueless themselves. Some of what you said was partially true, but you're clueless to the causes, and who is responsible. I am one of those retired military officers who got out of the Navy and worked for several different defense contractors, as a Program/Project Manager, a Proposal Manager, and as Director of Military Contracts, and you sir, don't have a clue about what you're talking about.

The $500 dollar hammers, and $1500 toilet seat are NOT caused by the Defense Contractor...they're caused by the branch of service who awarded the contract, and who administers iit...oh, and a thing called MILSPEC. Those ex-military types you rant about that get out and then make big bucks, is partially true, but those same people also go to work for the military and are involved in awarding/auditing/administering the contract. Those government workers get paid big bucks too, and their salary is paid by the taxpayer.

The Defense Contract Industry is a game...yes, I said game. But, the government/Military set the rules, and they created the game. No contractor will make a profit by producing what they originally proposed, and was awarded...in fact they'll lose money. The name of the game is lowest bidder gets the contract, that is as long as it isn't a fraudulent proposed contract (which there are quite of these too, usually by new contractors who don't understand the game). And, if you want to work in a burn-out high stress long hours job, get a job as a proposal manager. Now, big ship contracts, like this Carrier, is usually only between a couple companies, because only a couple shipyards/companies have the expertise to build a large ship, or plane, or weapon system. But, there are hundreds of big to small contracts awarded to second, third, fourth, tier sub-contractors...the shipyard usually just assembles everything and is the main administrator of the contract.

Since no contractor will make a profit on their original bid, how do they make money? They make money on change orders. They may have bid an engineer at $16/hr on the original contract (which was most likely really paid $24/hr), but on the change order they will bid/charge the $24/hr plus overhead, materials, etc.). Now, let me say that if you are awarded a contract where you bid that engineer at $16/hr, and he actually makes $24/hr, and for wh**ever reason there are no change orders ever made to that contract, the government will sit back and let you lose money. I know, I took over a contract just like that, and my job was to minimize the loss...we lost $4M. Now, who initiates these changes? It's the government/military, not the contractor...if the contractor does, he will eat it usually, unless they can convince the government/military that it was overlooked by both sides, or it is some new system/technology. It takes on an average 7 years to get a new weapon/electronics system from the drawing table to the fleet...whole ships can take longer. During this time new technologies arise that the military decides it wants, and the contract price goes up (labor+materials+overhead, which can be big bucks). The military is the biggest culprit in creating change orders and driving up the costs. Those $500 hammers are caused by the military not the contractor, due to a thing called MILSPEC. Require a new tool to fix an item, the military will want that supplied by the contractor, even though one could buy that tool for $50 at Sears. First it needs a MILSPEC drawing, that by itself will be $10,000, then it has to be QA'd, taken to a government QA facility, frozen down to -70 degrees, and heated in an oven to a 160 degrees, and tolerances measured each time, etc. That drives up the cost, in the end, that Sears $50 hammer now has cost the government (and tax payer) $500. Now, the more they order, the price goes down...but, usually they only require a few. And, from experience, most contractors will try and convince the military to save money and purchase the hammers from Sears...the contractor does not want to mess with them.

The profit margin of most large Defense contractors is around 2-4%, but 2% of a several million/billion dollar contract is a sizable chunk. The government/military will put large QA entities on site, requiring the contractor to provide offices/facilities, etc. These QA people can be like vultures sitting on limbs...trust me they can make your life miserable. They in turn, with their oversight, will drive up the cost of a contract. No Defense Contractor that I ever worked for tried to perform shady or fraudulent work or charging...in fact they will bend over backwards to prevent it. I have been in many an stressful ulcer creating situations/meetings trying to find solutions to keep costs down. It behooves them to, it's their livelihood, they can't afford to be black listed. Now are there some unscrupulous ones out there, sure there are, but the percentage is not as high as one would think. A lot of those come from sole-source non-competitive bids and they get used to padding things, they get caught.

Yeah, the costs of those contracts are high, but it's usually not the contractor who drives up that cost, it is the military, and/or government. Defense contractors come and go, merge, etc during bad economic times, I think more than civilian industries. Huge lay-offs are very common in the Defense Contract industry, there is no such thing as job security. Now, we could have the government take over all these contractors, like China and Russia has, but you will spend even more money, and get an inferior product.

I could go on, and on, but I think I've said enough. There are a lot of good and honest defense contractors out there, and having many ex-military/retired military on their payrolls, and trust me most of these people are looking out for the military's interest, not just to increase the profit of the contractor.

JFlorio Loc: Seminole Florida

Thank you. Always wondered how that process truly worked. You do know even though you have been directly involved in the process you will be told by people who read the internet they know more than you on this subject.

Rufus Loc: Deep South

:thumbup: :thumbup: :thumbup:

JMHO Loc: Utah

Oh yeah, Ipnmajor and I have through this before. There are a few others on OPP who think they know how it works too, but they don't.

Pulfnick Loc: Knoxville, TN

Thanks much for your detailed explanation. As I read the original post, the lack of mention of change orders sent up all kind of red f**gs. I figured the culprit must be change orders, but wasn't aware of some of the monkey business you describe.

dennisimoto Loc: Washington State (West)

There was a contractor in San Diego that insisted that every condition report be answered on a Contract Mod form rather than a Price Proposal as was done in Seattle. At various points in the project Seattle would lump a bunch of settled, negotiated Price Proposals into a single Contract Modification. There could be as many as 1,500 condition reports submitted in a 9 month destroyer overhaul and in San Diego that meant 1,500 Contract Mods vs 4 or 5 contract 'Mods' in Seattle. The CA contractor would then lodge a claim for $5M at the end of each contract for "Excessive number of contract mods issued after award." And the govt. oversight guys would award it! Yes indeed, change orders. If there aren't any changes we'll make them up!

JMHO Loc: Utah

Haven't run into "made up" change orders. Trust me, there is a whole lot more to that story. I'm not saying there wasn't any padding, but I bet it is a lot smaller than you think. The government QA'ers and auditors are pretty good at their jobs...usually.

Ship overhauls always have a lot of changes because when they tear into something there is always more to be done than first realized. INSERVs, as well as ship's company, do the best they can to itemize what needs to be done, but my experience, when I was the ship-to-shipyard liaison officer during one overhaul, there are bunches and bunches of changes/mods that come up that were never planned for. And, each one has to be investigated...there is no waving a magic wand.

9th Marines

:thumbup: :thumbup: :thumbup: :thumbup: :thumbup:

9th Marines

Thanks for the reply. I remember the $500 hammers and the MILSPEC explanation. What you are saying, it appears, is that the cost over-runs are a function of government/military malfeasance--or at least complicating a simple process--buy the tool at Sears, Home Depot, or Lowes. No matter the cause, the taxpayer is picking up the tab for stupidity--or at least what appears to be nonsense.