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The so-called "real" explanation of the $600 hammer doesn't make the story any better. The hammer did indeed cost $435. If the government wanted to buy another
by unreal37 3y ago
The so-called "real" explanation of the $600 hammer doesn't make the story any better.
The hammer did indeed cost $435. If the government wanted to buy another one, the contractor would have charged them an extra $435. Just because the extra $420 was "R&D expense" for something else, doesn't make the hammer any cheaper.
Even in the most charitable explanation, this makes it impossible to know the real cost of anything. If the contractor can lump all sorts of charges into the cost of the hammer (for unrelated projects), it's a way of hiding the true cost of anything.
I've worked for companies where they took money meant for one thing, and used it for something else. "Can you record your hours on this project under this different expense code?" This stops them from going over budget and having to explain to the client, but takes the money from another project of that client instead.
The $435 hammer sounds like that. They didn't have R&D budget, but they had a hammer budget. Let's spend the $100,000 hammer budget.
About 20 years ago, a friend of mine worked on a contract for the Department of Defense in IT. He told me that he was making $1500 per day, and for the first few weeks, the government didn't have a computer for him. So he sat at a desk, reading "printed manuals" waiting for a computer to arrive. For weeks. Making $1500 per day.
The truth is worse than a $600 hammer.
- no_wizard 3y agoWowza, he made 360K a year working for the DoD 20 years ago? Sure hope he was smart with the money, you could use that to really jump start your life early
- asynchronous 3y agoYeah I don’t think this story is a silver bullet for “government doesn’t overspend!” That the author seems to imply
- bryanlarsen 3y ago> the contractor would have charged them an extra $435. R&D expenses are one time costs, they're not charged multiple times. An extra hammer would have cost $15.
- unreal37 3y ago"when the contractors allocated their engineering expenses among the individual spare parts on the list... they simply treated every item the same" Sounds like an extra hammer would have cost an $15+$420=$435. Anyways, we'll never know. I will say, the one thing I believe, is that the government had a bucket of money to spend on the project. Let's say it was $1 million. And the contractor was going to get all of it, all $1 million. Not a penny more and not a penny less. And so you can't really trust the invoice is accurate except for the total being the budget available to spend.
- woooooo 3y agoThey would have amortized the 420/item across one more item. No additional research cost.
- Retric 3y agoYou’re ignoring the underlying math. If they needed 2 hammers then both hammers would have cost less. Thus rather than 2 * 435$ hammers + other junk you get 2 * 430$ hammers + other junk which is also 5$ cheaper (or whatever the actual number works out to.) Net result a total that’s 15$ higher and a different set of otherwise meaningless numbers.
- pests 3y agoHey! Buying that second hammer reduced the per-item R&D costs across the entire order!
- stonemetal12 3y agoThe article even points out that an additional B2 Bomber would cost an additional 700 million not the reported cost of 2 billion. Including R&D costs makes sense in some situations, but not when buying one more.
- ekidd 3y ago> If the government wanted to buy another one, the contractor would have charged them an extra $435. This claim appears to contradict what the story says, as far as I can tell? He's the original: > The military bought the hammer, Kelman explained, bundled into one bulk purchase of many different spare parts. But when the contractors allocated their engineering expenses among the individual spare parts on the list-a bookkeeping exercise that had no effect on the price the Pentagon paid overall-they simply treated every item the same. So the hammer, originally $15, picked up the same amount of research and development overhead-$420-as each of the highly technical components, recalled retired procurement official LeRoy Haugh. (Later news stories inflated the $435 figure to $600.) > "The hammer got as much overhead as an engine," Kelman continued, despite the fact that the hammer cost much less than $420 to develop, and the engine cost much more-"but nobody ever said, 'What a great deal the government got on the engine!'" So the bought an order containing a hammer, an engine, and some other stuff. There weren't itemized prices. So they divided the price evenly between everything in the box. Which is a silly way to do accounting. It's as if I bought a "woodworking kit" containing a hammer, a screwdriver and table saw for $900, and then I decided decided that meant the hammer cost $300.
- unreal37 3y agoI acknowledged in my comment that even if the most charitable explanation was assumed, the method of accounting is misleading and makes determining the cost of anything impossible.
- flavius29663 3y agoHow is that? If you buy an engine, do you itemize by: engine block, alternator, water pump and starter? You might include in the requirements that the engine must come with all 4 extra elements, but you will pay for the whole engine. Now, if someone wants to be misleading, they could say the water pump was 1/4 of the price...
- karaterobot 3y agoIf the total R&D cost for all items is split across every single product equally, there's no way to tell how much of the $435 hammer is R&D for the hammer. It's a really weird way to do accounting, almost like they just didn't keep track of how much R&D they did for each item. And that makes you wonder if the amount they are charging is even real in the first place. In general it lowers confidence and makes you think you're probably being ripped off (which, hey, is true).
- JoeAltmaier 3y agoI was playing poker with an old High School classmate who worked in Washington. I mentioned my consulting company chared 15% - 25% overhead for project management over what our Engineers got hourly. He laughed, said "In DC that would be 200%" I guess I believe it, from all this.
- wmf 3y agoThat's not unique to the public sector. Business and IT consulting charges similar markups for all customers.
- systems_glitch 3y agoThey don't call them "beltway bandits" for nothing!
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- com2kid 3y agoIn Seattle, vendor/staffing companies typically charge a 50%-100% markup, though I have seen 200% at the most extreme.
- NikolaNovak 3y agoThat last paragraph, is that unusual? As a kind of sysadmin, I was fairly ready to go week 1 on most my projects. But in my erp space, developers and testers have to understand business, processes, functional aspects, etc. Whether specifics of clients payroll process or their finances or whatever. So "spend a week reading manuals" is normal. We call it "onboarding". And of course they're getting paid - they're not doing it for fun. Have I had a weird career? :-)
- bytheirfruit 3y agoDefinitely weird. ;) You should let clients know when it's time to 'put up or shut up'. After all, talk is cheap?
- NikolaNovak 3y agoI don't follow. What's the context or meaning of put up or shut up? Did you reply to right thread or did I inadvertently misrepresent anything? My point is that on all my projects for 25 years now, it's normal for many roles to need a significant amount of studying to become productive. That studying may involve project or client specific material such as design and architecture documents, functional specs, process and procedure documents, business overview, etc. On bigger projects there might be a part or full time training / L&K coordinator who would prepare and maintain training materials for new team members, create on boarding paths for roles etc. I read on HN about developers who start coding week 1 and I'm always impressed and astonished but also puzzled - coding what? In ERP world all code satisfies a specific business purpose and a random outsider wouldn't understand business functionality to create or fix business code day 1. Is it actually our goal to be interchangeable cogs, knowing only technology stacks but nothing about business or functionality? Either way, I don't understand what client shoild put up or shut up?
- joshspankit 3y agoIf they are indeed replying to you, I suspect they are coming from a freelance background where it’s sometimes beneficial to have a hard line in order to either get the project moving or drop the client (and move on to more serious ones)
- emodendroket 3y agoThe point of the piece would seem to be not "all is well" but that the real problem is the accounting practices used to direct programs. You've posed this like a counterpoint to the piece but there's significant overlap between what you're saying and the arguments it makes.
- logdap 3y agoI don't know man, custom bespoke anythings probably need to cost a few hundred dollars to make it worth the time of the company, who needs to pay the workers and all the useful and useless management alike, and still turn a profit as well. The fault really lies with whoever in the government decided that a COTS hammer just couldn't work.
- gumby 3y ago> I've worked for companies where they took money meant for one thing, and used it for something else. "Can you record your hours on this project under this different expense code?" This stops them from going over budget and having to explain to the client, but takes the money from another project of that client instead. Seems like a whistleblower could put a stop to this, and get a hefty reward as well. It's a felony. The same thing happens in the private sector (law firms, management consultants, etc) but there's little control over that.
- meetingthrower 3y agoYes but most of the time in these things the hours billed are internal cost controls, not billed straight through to client. Eg, it's a fixed price contract. But sometimes you have to work more or less so you horsetrade between projects. Agree with you if billing time through, but usually this is pretty strictly tracked. (source: was a consulting partner)
- sverhagen 3y agoA lot of companies make you track hours to distinguish capital expenses from operational ones, I assume for a different tax treatment, which I don't think has only internal implications.
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- DontchaKnowit 3y agoPeople have entire careers that are like this. 20 years of doing jack shit but cashing pay checks
- RajT88 3y agoWhen I was a consultant, I had private companies do that at a cost to them of $2200 a day. I had one project where this went on for 5 months. This was a private company with massive ill-gotten gains, which wasn't shy in spending that money frivolously. Whatever man, I guess.
- dataflow 3y ago> The hammer did indeed cost $435. If the government wanted to buy another one, the contractor would have charged them an extra $435. What are you basing this on? If I buy a gaming console bundled with a game, you're saying that implies I have no other option to purchase the game separately? Is there a leap of logic here or did I miss something in the story?
- GuB-42 3y agoThat $1500/day contact with no computer for a week is an extreme case but paying people to do nothing because the environment its not ready is fairly typical for large companies/governments. I have done many contracts like these and it went smoothly only once. I arrived first day in the morning, my contact came to meet me, gave me my badge, brought me to the IT department so I could pick up my laptop, on it was a post-it note with my identifiers, I then went to a desk that was cleared for me. An hour later, I was at work. Usually, I consider myself lucky to get to that point in a day. So normal and yet so rare, as if these companies like to pay people for nothing.
- sidewndr46 3y agoI met someone who spent six months in a SCIF waiting on a project to start. Go in every day and wait for 8 hours for some indication that work was available. He said by the end of the "project" (which never involved any actual work) he had a complete space invaders clone written in Microsoft Excel with multiple levels, different game modes, difficulty levels, high scores, etc.
- bitwize 3y agoIn Independence Day (1996), as President Thomas Whitemore and company are being led into the secret government alien lab, he wonders aloud where the funding for the lab came from, to which Julius Levinson (the father of Jeff Goldblum's character) quips, "You didn't think they actually paid $5000 for a hammer, or $30,000 for a toilet seat, did you?" Indicating those sums were actually being secretly diverted to fund black-budget initiatives like the alien lab. Nice to see truth is not that far off from Independence Day.
- usernew 3y agoIs this truth worse? I have a completely different reaction to your story. There's a guy, who is a contractor (not an employee), who was hired to do work for the defense department. They hire and fire thousands per day. There needs to be a basic policy that guarantees a certain level of training and skill level, before you work on Defense for crying out loud. No one is going to spend days trying to figure out what you know and don't. Here's the training - some is easy, some you know, some is new to you. Get through it, then you start work. This is the same with private companies. Whenever I switch the major vendor I work for, I have to get some certs, get some training, and most of the stuff I already know. Last time this happened a couple of years ago, I spent at least a month, just watching training videos and taking little quizzes at the end. This guarantees that before they send me to a customer, I have the base training for my role. I already knew 95% of the stuff. I put the 2 hour videos on play muted, read the pdf a couple of times a day apart (30min of my real time), and passed the quiz at the end. Your friend didn't have to watch useless watered down videos, and was just given the manuals. I wish I had those PDFs I read printed for me, but I didn't want to waste a whole tree worth of paper. Yes, the training needed to get your baseline is part of your job. That's why people don't like it when they hire you and leave after a few months - because they have to pay you to certify your baseline skills those months. No, you don't get paid less or more, depending on the type of work you are doing. If I have to come out to a DC and debug raw fiber channel dumps, or sit on the toilet at home and draw a visio - I get paid the same. You get paid per hour, not per type of task. That is literally every job that exists. The $600 hammer is theft and billing fraud. Getting paid the same rate while the company certs you with training for your job, as you get paid for the rest of the job, is called employment.
- noizejoy 3y ago> If the contractor can lump all sorts of charges into the cost of the hammer (for unrelated projects), it's a way of hiding the true cost of anything. You should have seen the massive number of very large enterprise IT projects in the late 1990s that were justified, approved, budgeted and accounted for under the famous Y2K umbrella. Every reasonably smart business or IT manager figured out ways to connect their pet project to Y2K and after that the approvals were almost automatic. Because what VP, CEO, board member or even shareholder dared to question the necessity of preventing the potentially catastrophic events if Y2K bugs weren’t properly eradicated. It was pretty amazing times.
- xapata 3y agoSounds like any bureaucracy. The government doesn't have a monopoly on inefficiency.
- paulddraper 3y ago20 years ago your friend was making $390k/yr on a DoD contract? I'm skeptical. Though I'd like to believe your story.
- wodenokoto 3y ago> About 20 years ago, a friend of mine worked on a contract for the Department of Defense in IT. He told me that he was making $1500 per day, and for the first few weeks, the government didn't have a computer for him. So he sat at a desk, reading "printed manuals" waiting for a computer to arrive. For weeks. Making $1500 per day. To be fair it’s the same in private companies. Last time I was consulting at a big international corporation all it consultants (including those from big 5) on the project was asked (against company policy) to bring our own laptop and use the guest WiFi, since that particular PM didn’t have the patience or budget to wait a week for laptops to be acquired and setup. In my opinion it’s a bit of a trope.
- aaron695 3y ago[dead]