Decades of federal government ‘cost-plus’ contracts increase taxpayer costs 2, 3, 4+ times

guest blog by “Captains America” (bio below)

The biggest issue with federal government purchasing is the use of cost-plus contracts. This should be an issue that most people agree with regardless of their political leanings.

Cost-plus contracts are a way for government acquisition professionals to pass on research and development risks to the taxpayers. The acquisition professionals cause this risk to taxpayers through two different actions: 1. Writing poor system requirements and 2. Not contracting for the proper lab work, experimentation, and prototyping for new technologies. Essentially, programs are going forward for full funding without the proper engineering and scientific effort being conducted to refine new designs and catch unforeseen problems with new technologies. There are programs funded that contain requirements for technologies that don’t even exist in a proven prototype.

For some programs that are funded by Congress, there are several high risk technology requirements that are rolled into the same project, compounding risk to taxpayers. While the contractors experiment, fail, and experiment again to try and meet those requirements, the bills keep piling up.

The Space Based Infrared System (SBIRS) – High, which provides infrared sensors in space as part of the missile launch alert system, is an example of what happens when small scale sensor prototypes aren’t developed slowly in a laboratory research and development environment, and then introduced in stages (first as a small test sensor on an operational satellite and later as its own acquisition program for full-scale development). The program experienced massive cost overruns on the order of 400%; see Budget Busters:  The USA’s SBIRS – High Missile Warning Satellites.

Poor system requirements writing continues because in many cases acquisition professionals are just taking various inputs from organizations, consolidating the requirements, and pressing forward with a new program without understanding where to cut and shape requirements in order to bound risks. It’s an ignorance of what’s state-of-the-art practice in industry today versus what isn’t feasible to accomplish in the near-term.

The cost overruns and schedule slips include naval ships and aircraft. The Navy can’t even purchase small ships designed for coastal operations without having costs more than double; see Cost overruns have military facing ‘train wreck,’ McCain says.

Federal government acquisition professionals in most cases are also the last group you want managing new technology efforts. In most cases, they have never personally designed anything high-tech, never led lab experimentation, and never built a system prototype. In addition, they are motivated to create the most expensive and massive programs possible. It’s a contest in the government to try and secure as much of the overall budget pie as possible. Acquisition personnel are promoted based upon the dollar value of the contracts they manage.  The whole personnel system must be changed so that acquisition personnel show in their personnel file how they managed system requirements and system risk instead of rewarding them for managing large dollar value contracts.

There is no reason for federal government offices or their contractor teams to fear any action from Congress because they submitted completely flawed program costs and schedule when introducing a program to Congress. Government employees aren’t fired, and contractors are not blacklisted from contract competition if they fail to deliver on promises. Federal government project managers know the real hurdle is to get a project’s initial approval and funding by Congress. For example, there is a continuing expectation among NASA personnel that projects that fail to meet cost and schedule goals will receive additional funding; see Hubble Psychology Causing NASA Program Cost Overruns?

Congress is motivated to approve and fund these large-dollar-value, high risk programs. Contractors purposefully stage branch locations in key Congressional districts so that the big programs are approved. They are sold as jobs programs to Congressmen, despite the fact that we can create even more profitable jobs in this country if we do a better job of prototyping, research and development, and requirements management. Congressmen are rewarded for looking the other way during one schedule slip and cost overrun after another. Just do a review of which contractors contribute to their campaigns.

We must get Congress to force a change in federal government purchasing (also called acquisitions). For components, types of materials, sensors, software programs, etc. that are new and high risk to develop, a government Research and Development office should be the lead to work with industry and produce a lab prototype that is either small scale or full scale. A second stage prototyping may also be required for some high risk technologies in order to integrate a new component or material into an existing operational system in order to perform additional testing and evolution of the technology. This would allow scientists and engineers the time needed to gain the knowledge required to transform a high risk technology into a moderate risk technology. Congress must stop financing purchasing contracts for complete systems that include several high risk technologies.

The continuous waste of taxpayer dollars on poorly managed space and defense programs should not be allowed to continue. This is a decades-old story now and our do-nothing Congress still hasn’t moved to make prototyping and risk management a must for all federal government acquisitions.

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Bio: Captains America is the pen-name of two decorated US Air Force members. Both now work in the private sector with no ties to government. Expert testimony always has documented facts speak for themselves; Captains America embrace this professionalism.

 

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