[HN Gopher] The myth of the $600 hammer (1998)
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The myth of the $600 hammer (1998)
Author : ctoth
Score : 42 points
Date : 2023-05-17 20:42 UTC (2 hours ago)
(HTM) web link (www.govexec.com)
(TXT) w3m dump (www.govexec.com)
| sam_goody wrote:
| <OT>
|
| A plumber once showed me his $805 wrench.
|
| It cost him $5 on AliExpress, and in the middle of his tightening
| a bolt with all his weight, it split into two and one half hit
| him in his tooth.
|
| The co-pay for the tooth implant was $800, hence his "$805
| wrench" and a moral not be cheap on your tools.
| systems_glitch wrote:
| The first time you get to drill and extract a stripped fastener
| on-site because you had a cheap tool in your box really ought
| to be the last day you spend on cheap tools! I'd imagine a
| personal injury would really reinforce that sentiment.
| einpoklum wrote:
| The kind of justifications we read in the article is how things
| got to the point they are now. Just last year, the DoD failed yet
| another audit:
|
| https://thehill.com/policy/defense/3740921-defense-departmen...
|
| "After 1,600 auditors combed through DOD's $3.5 trillion in
| assets and $3.7 trillion in liabilities, officials found that the
| department couldn't account for about 61 percent of its assets,
| Pentagon Comptroller Mike McCord told reporters on Tuesday."
|
| So, what a military establishment tool might present as the
| exigencies of dealing with federal accounting is actually a wedge
| of Swiss cheese with holes so large, that I shudder to think what
| those military-cum-intelligence-industrial-complex types have
| snuck in through them.
| neonate wrote:
| https://archive.ph/xadxb
|
| http://web.archive.org/web/20230517204259/https://www.govexe...
| NotYourLawyer wrote:
| Not surprised. So many stories about an organization doing
| something that's evidently crazy turn out to be bullshit.
|
| The truth is always more nuanced than what gets reported. People
| are (almost) never as incompetent/crazy/malicious as it might
| seem on a cursory review.
| HPsquared wrote:
| The truth is always more complicated and boring than the viral
| meme.
| rdl wrote:
| The "color of money" thing was so obnoxious when I was
| contracting in Iraq. They could easily spent essentially
| unlimited amounts for certain kinds of things which weren't
| needed, but then couldn't pay for other things (with less
| than a 6-24mo process to get new funds). I understand the
| fraud/misappropriation that would happen without such
| systems, it was very cumbersome. And due to "anti-deficiency
| act", it was illegal to just pay for it out of pocket and
| give them stuff for free, too.
| Carioca wrote:
| Reminds me a lot of the million-dollar space pen vs pencil
| story
| sam_goody wrote:
| I understood that anecdote to be true.
|
| Fisher spent $1M (of "then" money) creating a "space pen",
| capitalized on the unique opportunity and publicity, and went
| from a startup to a $60M company. They knew that the
| astronauts could use a pencil, but that wouldn't be very
| profitable for them.
|
| For Fisher, it was a capitalist triumph, and symbolized
| American values. For the U.S.S.R. it symbolized U.S.
| wastefulness, and was portrayed in a negative light.
|
| For the media, if they can portray something as terrible,
| they will. It sells papers. So that is kind of a capitalist
| triumph as well.
|
| In the end, it turned out to be dangerous to use pencils in
| space (graphite turns into a floating flammable dust while
| writing), so eventually both the Soviets and the Americans
| bought space pens.
|
| Which was great, as Fisher recouped about $1K just from NASA!
| More importantly, that marketing ploy may have saved the
| entire spacecraft - the law of unintended consequences!
| logdap wrote:
| [dead]
| steveklabnik wrote:
| The hot coffee lawsuit is the first thing I think of here. Heck
| even the name is like... whew.
| emodendroket wrote:
| I guess "the dangerously hot coffee that fused a customer's
| labia" does not have the same punch when trying to argue for
| tort reform.
| logdap wrote:
| [dead]
| sverhagen wrote:
| Sorry, I really couldn't tell what side you're arguing for
| here. But the hot coffee lawsuit was a good example of
| something that seemed crazy on first look, when on further
| examination... it still seemed crazy?
| Throw73849 wrote:
| I really hope all those three letter agencies get purged after
| next elections! All it takes is presidential decree!
| arh68 wrote:
| The "myth" is quite real, e.g. the $1,000+ coffee cup
|
| [1] https://www.airforcetimes.com/news/your-air-
| force/2018/10/22...
| OrvalWintermute wrote:
| This is not a conventional coffee cup.
|
| It is a cup that plugs into the electrical outputs on a
| military airplane.
|
| The more that the DoD stands up 3d printing, the less these
| kind of things will be an issue, particularly once they start
| doing more 3d printing in metal.
| tourgen wrote:
| [dead]
| zhobbs wrote:
| The manufacturing process isn't the issue, it's the layers of
| contractors, subcontractors, and lack of accountability.
| unreal37 wrote:
| 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.
| NikolaNovak wrote:
| That 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 wrote:
| Definitely weird. ;) You should let clients know when it's
| time to 'put up or shut up'. After all, talk is cheap?
| emodendroket wrote:
| The 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.
| ekidd wrote:
| > _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 wrote:
| I 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.
| cbsmith wrote:
| > The hammer did indeed cost $435. If the government wanted
| to buy another one, the contractor would have charged them
| an extra $435.
|
| But the above statement wasn't true.
| nerdponx wrote:
| * * *
| D13Fd wrote:
| Your main comment is literally untrue and contrary to the
| article, and pointing out a separate problem with telling
| what things cost doesn't change that.
| flavius29663 wrote:
| How 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 wrote:
| If 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 $435 hammer is R&D for the hammer. It's a really
| weird way to do accounting, almost like they just didn't
| keep track of how much R&D they did for each item. And
| that makes you wonder if the amount they are charging is
| even real in the first place. In general it lowers
| confidence and makes you think you're probably being
| ripped off (which, hey, is true).
| hgsgm wrote:
| You know what you are paying for the bundle you get.
|
| You can also get multiple bids for different bundles. The
| problem here, if any, is not getting competitive bids for
| the bundles.
| juhanima wrote:
| The article is not quite clear why the contractor had to
| split the intangible goods cost to the tangible ones, but
| it does give a hint. Federal accounting is meant to
| prevent overspending and that's why charging for
| intangible services is not allowed or made diffucult.
|
| So to me it sounds like this: you hired me to make a wall
| of bricks around your garden. I did it and presented you
| a bill: bricks 100$, mortar 20$, work 300$. Then you say
| I cannot charge for work as that's intangible and I have
| to restructure the bill by allocating the cost of work to
| the tangible objects. So instead of charging for work I
| charge an 30c bricklaying fee for each brick, because I'm
| pissed off by your awkward and unpractical accounting
| requirements.
| RajT88 wrote:
| When 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.
| logdap wrote:
| [dead]
| gumby wrote:
| > 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 wrote:
| Yes 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 wrote:
| A 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.
| JoeAltmaier wrote:
| I 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.
| systems_glitch wrote:
| They don't call them "beltway bandits" for nothing!
| wmf wrote:
| That's not unique to the public sector. Business and IT
| consulting charges similar markups for all customers.
| dataflow wrote:
| > 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?
| asynchronous wrote:
| Yeah I don't think this story is a silver bullet for
| "government doesn't overspend!" That the author seems to imply
| no_wizard wrote:
| Wowza, 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
| DontchaKnowit wrote:
| People have entire careers that are like this. 20 years of
| doing jack shit but cashing pay checks
| bryanlarsen wrote:
| > 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 wrote:
| "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 $1 million. Not a penny more and not a penny less.
|
| And so you can't really trust the invoice is accurate except
| for the total being the budget available to spend.
| Retric wrote:
| You're ignoring the underlying math.
|
| If they needed 2 hammers then both hammers would have cost
| less. Thus rather than 2 * 435$ hammers + other junk you
| get 2 * 430$ hammers + other junk which is also 5$ cheaper
| (or whatever the actual number works out to.)
| woooooo wrote:
| They would have amortized the 420/item across one more
| item. No additional research cost.
| stonemetal12 wrote:
| The 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.
| itake wrote:
| A rumor I heard during my internship where I ran MIL-S-901D
| experiments was that the government spec'd a very specific type
| of hammer from a supplier to perform this test. The supplier went
| out of business, but the spec still required the old hammer.
|
| So the cost for just hitting an object with a hammer jumped to
| $4k+ since there were so few compliant hammers on the market.
| OrvalWintermute wrote:
| There is truth to the uniqueness of certain requirements driving
| up expenses.
|
| When you want a specific toilet seat component
| https://www.washingtonpost.com/business/capitalbusiness/the-...
| made to very some specific specs with a unit quantity of 1-3 with
| no inhouse production capability, and you need to reverse-
| engineer the existing one to make the new one, create a model,
| test it, research the initial design specs upon which it was
| based, etc., you're going to pay through the nose for it.
|
| Now, if you can 3d print it but have already done all the upfront
| work and have a great 3d design that has been tested, then you
| may be able to print it cheaply, but legacy military & aerospace
| designs may not even exist in CAD designs.
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