Speaking in generalities, this is a situation where both the contractor and the government have taken each other hostage. It almost can’t not be that way.
That basically guarantees all the perverse outcomes mentioned above, no matter how the contract is structured or how good the project design, project management, and project implementation is. Bad workmanship can make anything worse, but in situations like these even excellent workmanship throughout still produces an unholy clusterf***.
Commercial products generally have anywhere from 25% to 40% profit margins (profit margin on an iPhone is 35%) because the company is assuming all the risks associated with delivery. Cost plus government projects offer anywhere for 8-10% margins but the government assumes most of the risks. If the government wants a fixed price contract for something that has any significant risk (like the B21- it has requirements that are well beyond anyone has built before), then expect the bids to double or triple in price.
Correct me if I’m wrong, but the tender process includes a questions and clarifications stage. Why didn’t any of the potential bidders ask about the guidance system then?
To my ignorant layman perception, ISTM that this became a particularly serious problem after all those mergers and acquisitions whittled down the number of defense contractors down to just a few. McDonnell went belly up and Boeing also bought up the F-15 and F-18. Now Uncle Sam has fewer and fewer options and Lockheed is all the more able to hold the government hostage than before.
What’s funny about that is DoD caused those mergers. Deliberately. See this 1998 article for an outline:
This 2001 pdf has more details on what happened and why from an insider perspective
It does, and I cannot speak to it because by the current interpretation of the Federal Acquisition Regulation (the FAR, rules for procurement activities that go across all DoD procurements), as a SETA I am not allowed to be involved to provide guidance during the selection process for reasons that make about as much sense is the “She’s a witch!” trial in Monty Python and the Holy Grail; II guess we might influence the selection process by interjecting reason and experience, I suppose. Anyway, it literally resulted in discussions by the government in how they could somehow let a separate contract to have a third party provide a guidance system as if this is a bolt-on aftermarket exhaust or something. Eventually they just revised the TRD to include the requirements and went through a contract action to updating, paying what the contractor demanded because of their own oversight.
Yeah, this is largely a self-created problem. Post-Cold War the DoD saw difficulty in budgeting a wide array of programs to sustain the field of contractors and through various means encouraged contractors to merge into large conglomerates despite all evidence that this often resulted in bloat and failure. (Anybody even remember Ling-Temco-Vought?) As a result, we now have few primary contractors capable of working large development programs and they are often forced into working alliances like Lockheed and Northrop on the F-22 Raptor or Lockheed and Boeing in the United Launch Alliance (ULA), providing no competitive advantage in controlling cost growth.
The biggest problem today in large aerospace and defense projects, aside from a lack of consistent guidance and solid requirements, is that the procurement process is utterly broken and often drives costs up rather than giving program managers a means to control them with oversight and competition based upon technical and programmatic competence. In the effort to stamp out corruption and waste (which were real but overstated problems) the DoD now has massive bloat and a lack of honest competition, to the end that everybody underbids and the relies on “out of scope” challenges to demand more money.
Stranger
Looks like the Next Generation Air Dominance program is being run in a radically different way. It’s meant to be fast, cheap, and constantly churning out small batches of new fighters every few years - a total upheaval of the take-decades-and-throw-money-down-the-black-hole approach of the Joint Strike Fighter.
I know these are frigates and not destroyers, but couldn’t Canada order a few new Arleigh Burkes from the United States for 1/10 the cost? Unless Canada either doesn’t want to be too dependent on the USA (understandable) or the Arleighs aren’t in production any longer.
I do not know a lot. But I suspect a main priority of many Canadian governments is to give work to Irving and other domestic manufacturers - and not just to obtain the ships as the only goal. This may have been a factor in a scandal where a high ranking naval officer was allegedly mistreated.
I literally laughed out loud while reading the article you linked. An excerpt:
Almost every detail about the aircraft itself will remain a mystery due to the classification of the Next Generation Air Dominance program, the Air Force’s effort for fielding a family of connected air warfare systems that could include fighters, drones and other networked platforms in space or the cyber realm.
Roper declined to comment on how many prototype aircraft have been flown or which defense contractors manufactured them. He wouldn’t say when or where the first flight occurred. And he refused to divulge any aspect of the aircraft’s design — its mission, whether it was uncrewed or optionally crewed, whether it could fly at hypersonic speeds or if it has stealth characteristics.
Those attributes, he said, are beside the point.
This is some real Milo Minderbinder-levekl bullshit, and somebody owes the estate of Joseph Heller royalties on this article. For the record, Defense News is an industry rag that is about as reliable in its investigative journalism involving the defense industry as World Weekly News was in covering the continuing exploits of “Bat Boy”. But thanks for the laugh; it’s been a rough day of pointless telecons and dumb task updates and I needed the the lift.
It may surprise you to know that the Arleigh Burke-class guided missile destroyer is still in production, albeit at a very low rate owing to the lack of shipbuilding capacity and at a cost approaching if not exceeding US$2B per delivered unit is hardly a bargain. To a certain extent, it makes sense for a nation the size of Canada to maintain some internal capability for manufacturing so that they are not utterly dependent upon external supply, especially when it comes to shipbuilding for which the US was once the industry leader and has now withered to almost negligible output.
On the other hand, the major coming national security threats are primarily linked to the effects of climate change, and doing things that actively protect coast cities is probably the smartest bang for the buck, and building a large fleet of ships means finding places for them to harbor in that aren’t going to get overrun by massive storms and coastal erosion.
Stranger
It sounds like we have been involved in some similar shenanigans. More than once I have joined projects that had massive requirement holes. Holes that would have easily been pointed out had any of the more experienced engineers been involved in running the competition (experienced not in terms of years, necessarily, but just having recently executed similar programs).
That’s how you end up with RCP/ECPs (Requirements/Engineering Change Proposals) that are bigger than the initial contract itself.
And part of the problem is that many military systems are one of a kind to each generation. We have been building destroyers (for example) for a very long time. But by the time the Navy is ready to order a new destroyer almost everyone who worked on the last destroyer procurement has retired. The institutional experience is in a few older people, most in industry, a few in Government. The results are fairly predictable. The voice of experience is from older more conservative people. New ideas are discouraged or chosen more for how they sound than how they work.
The Canadian article emphasizes that the expensive models take the deep needs of the Canadian navy into account. In theory, that might mean they could break ice in the Arctic, when territorial pissings heat up in a decade or two.
But in practice, I’ve been racking my brain to determine how to make a ship more Canadian:
An article and later Letter To The Editor from Canada’s “Conservative” paper The National Post.
“I share Matt Gurney’s deep unhappiness with Canada’s failure to plan and make major military purchases, especially naval and air force ones. But I believe the problem is not the incompetence of either political leaders or bureaucrats.
In fact, they aren’t completed because our leaders don’t want them built. They have discovered it is enough to promise to build them, then spend elsewhere. The bureaucracy just does what it is told, which is: plan for the appearance of planning, not completion of the project.”
Honestly, not actually spending the billions on these ships is actually a pretty good idea. The US is just down there, below the 49th Parallel, with more ships than they know what to do with. Canada would probably be better off spending the money on something useful, like national healthcare or social services.
I realize I have an American-centric view as a biased American, but my thoughts while reading that article are that if Canada just ditched the shipbuilding program and bought all American, they’d get a product in their hands much faster, they’d get a proven and true commodity (U.S. vessels like Aegis or Littoral Combat Ships see real-life action,) they’d save a lot more money, and they wouldn’t necessarily have to lose jobs because with the $40 billion or so that they’d save, they could spend that 40 bil on supporting or creating many jobs elsewhere. The downside would be no ice-breaking ability and more dependency on their onerous southern neighbor.
Not all military overruns are caused by mismanagement or someone behaving badly.
Let’s say you are building a new fighter jet. It’s going to take years to develop this new jet, so if you make your jet out of the technology that you currently have, your jet is going to be old technology when it finally rolls off of the production line. So instead you design for the next generation of technology. Guess right, and everything comes together as it should. Guess wrong on how much you’re going to be able to push the limits of the next generation technology, and now you’ve got something that doesn’t work. You need to pour more money into solving the problems. So now you have cost overruns and schedules slipping, and no one did anything wrong.
I personally experienced this on my first job out of college. I worked on the radar and flir systems for a new jet. There had been a few screw-ups in the project with companies developing certain sub-systems being unable to deliver, so that caused some schedule slips and budget overruns right from the start. But the new stealth technology that they were developing really hit a lot of snags that no one had been predicting. This made the jet massively over budget and massively behind schedule. In the end, the jet ended up getting canceled, and I got laid off (and got out of defense work, and was much happier anyway in the long run).
If they had made the jet using proven technology that they knew worked, it would not have been stealthy and there wouldn’t have been much of a point to making it. So they gambled. In this case, they lost. Stuff happens.
I also worked on the fire control system for a helicopter. In this case, we started with a current generation CPU board that wasn’t fast enough and didn’t have enough memory to do what we wanted it to do. But we started developing code on it anyway. Meanwhile, a different group went about designing the next generation CPU. We were pretty far along in development when the new CPU board finally became available, and now we could finally test out a lot of code that had been written but wouldn’t work properly on the CPU board that we had started with. In this case, it all worked out. We had correctly guessed how much CPU technology would advance during development.
Sometimes you get lucky, sometimes you don’t.
And sure, sometimes someone bid the project incorrectly, or there were some shady back room deals going on, all kinds of stuff. The point is, not all cost overruns are caused by bad management and broken procurement systems. Some of it is just luck.
The Canadian military sees itself, much of the time, as a bunch of professionally trained soldiers with a proud tradition who performed exceedingly well in some significant past wars.
The Canadian public often seems to see the military as useful peacekeepers who can help protect Canada and serve as ambassadors abroad in times of crisis. This sometimes means they are involved in problems created by Covid or bad weather. The military sometimes resents this characterization and being involved in activities for political reasons rather than worthy battles.
Procurement is almost completely political, it seems to me. Both in a desire to spend on other things and to support local business despite its inefficiency. Despite the repetitive nature of the problem, Canada might actually require decent icebreakers in the near future. Trump caused enormous concern in Canada about the wisdom of relying on the US, which of course Canada has always done heavily.
American ships and planes won’t necessarily be any cheaper than home-grown ones. Buying ships from the U.S. still means having to pay a premium based on diversified manufacturing, just as building ships in Canada would. Congress doesn’t approve any large defense project that isn’t spread over a broad geographic base, even if it means adding significantly to the overall cost (which it will).
In any case, Canadian law almost certainly requires any American contractor to provide production offsets and technology transfer that will add to the cost of buying American, in order to boost whatever province could use a big steel plant/shipyard/whatever to reduce unemployment.
Sometimes buying American hardware works out because the purchaser gets the benefit of scale. But sometimes it means killing perfectly good projects in order to spend more (or to buy into a program that fails entirely).
This. The U.S. is no longer a reliable partner at time scales over 2 years. (Heck, they won’t even sell us vaccines, no matter who’s in charge in Washington.) If you contract to buy weapons from the U.S. (delivered in 10 years, operational for another 30), and some idiot in the White House – or a group of idiots in Congress – thinks they can get political capital from tearing up the contract, or cutting off spare parts, or using their hidden kill switch, you’re in deep… trouble. Better to buy from Europe or the UK, or build locally.