We all know that the US government once paid $600 for a $15 hammer. It’s a story trotted out every day as an example of how reckless and inefficient the government is. However, I recall once hearing that that story was far from the truth.
What’s the real story?
I’m not sure I get it – was each item listed separately, and then had an equal share of the R&D cost added? If there were, for instance, ten items, was the overall cost of R&D $4,200?
So in short, the hammer cost $15, but sloppy accounting led to some portion of R&D expenses (actually spent on other things) being listed as having been spent on the hammer.
Exactly. They had a list of items (lets pretend 10 items), which in total had cost $4,200 in R&D. Rather than take time to figure out how much they spent on each item, they just said “Let’s pretend each cost $420”, probably assuming no one would much care how they actually divided the R&D expenses. Unfortunately, it was noticed and ended up making them look rather silly.
Got it.
So the engine in question no doubt got the lion’s share of the R&D, but only $420 of that was actually charged to it, making it the bargain it was.
This is an interesting opinion on the issue.
Link
I agree with his viewpoint. Journalists are basically lazy and don’t want to investigate stories like this too closely because that would mean they would have to find real news to report.
First of all, it was $400 for the alleged hammer purchased by the Navy. (A custom-built toilet shroud built for P3C refurbishment is the oft-referred to “$600 toilet seat”, though in reality is it much more than just a seat.) The hammer became the icon for the excesses of military procurement and avarice found sole source supply contracts. To my knowledge no one has ever identified the manufacturer or supplier of the hammer, and the whole incident borders on urban legend, or a misprint on an invoice.
However, it was emblematic of the 'Eighties era in which massive military buildup led to many large “cost-plus” contracts for suppliers who turned a tidy profit, as well as major development programs like the Bradley Fighting Vehicle, the B-1B strategic bomber, the Peacekeeper Rail Garrison program, the mobile Small ICBM (‘Midgetman’), and various blue sky technology development programs under the aegis of the Strategic Defense Initiative which were essentially big and massively cost overrun programs with dubious merit. These programs were so complex and have so many facets that it is nearly impossible to make cursory criticism of individual failures that the general public can comprehend; however, a $400 hammer performing the same function as the $15 Stanley that your have hanging in the garage is an obvious absurdity that critics could focus upon as military spending out of control. This was further exacerbated by the then broad use of exacting MIL-STD requirements in procurement of even modest articles. The Defense Standard and Specification system was intended to assure quality and traceability in the military and contractor use of critical hardware in order to avoid failures due to substitution by a vendor using cheaper, poor quality components that often happened during supply shortages in WWII, but became an overarching system where every nut and bolt became required to meet highly (some would say absurdly) critical reliability standards intended for use in aerospace applications.
Today many MIL-STDs have been deprecated, replaced by either industrial standards (SAE, ASME, AISI, IEEE) or more liberal MIL-PRF standards in order to utilize COTS (commercial off the shelf, or as we say in the aerospace industry, “crap on toast sandwich”). The value of COTS hardware in specialized, highly critical applications has become a bugaboo because it frequently means compromising or overdesigning around commercially available hardware. On the other hand, being able to spec an SAE Gr. 5 hex head cap screw for a non-critical app means that the tech sergeant can go down to the hardware and get a half dozen replacement bolts for a couple of bucks, as opposed to submitting a procurement request and waiting two months for a $13 MILSPEC part of the same nominal quality.
Most of the absurdly costly parts I’ve run across in my work are so because they’re custom built–forged pins or tie rod ends of non-standard dimensions, environment control units design to work in -30°F to 130°F environments (far exceeding commercial units), et cetera. You could engineer in a COTS part, but you’d be giving up some degree of reliability or functionality (or both) for it.
Stranger
Source: http://dailylark.blogspot.com/2008/05/advanced-mission-extender-device.html
The contract is held by Omni Medical Systems, Inc. The user manual for this $2,000 cup/pad is available here (7.1 MB PDF warning.)
I knew a woman whose actual job was “civilian procurement quality analyst” for the Department of Defense. Whenever someone asked her what that meant, she replied “You know those $600 toilet seats you hear about? It’s my job to make sure they’re the best damn $600 toilet seats you can buy.”
I know a guy who sold $400 hammers. They were solid brass or bronze or something like that. They are used in particular environments where something that causes a spark is a no-no. The things were like 10 pounds each.
My favorite costly military story is the MIL-SPEC fax machines. I don’t know that this is true, but what I read was the Air Force spent years and a large amount of money developing environmentally rugged fax machines-that in all functional respects were the same machines you could buy at Office Depot for $200 or less. Congress kept complaining and cutting the budget. The AF ended up with less than a 100 of the fancy faxs. Then comes Desert Storm. The AF had fighter squadrons out in the middle of the desert-in extreme conditions. HQs in tents. no A/C etc. Commercial fax machines failed in less than a day. But op orders got through on the fancy machines. Without them, the AF would have been unable to efficiently carry out the plan. (or they would have had to buy an A/C just for the fax machines). Don’t know if it is true, but even if not, it is a cautionary tale. Sometimes the cost is worth it. Don’t complain about the cost, complain about the requirement. Save a lot more money that way. Or you will justify the cost a lot more effectively.
Also, one explanation that I remember reading right here on the Dope, is that often contracts are specified with very interesting and flexible supply terms, such that the military can, for example, contract with a supplier to supply anywhere from zero to [say] 10,000 military widgets, upon demand, with a lead time of two weeks. (I’m going from memory here and it was a LONG-ago post, but posted, IIRC, by someone who was once heavily involved in governmental contracts).
The above example might occur if the military were engaged in an operation, such as a war operation, where the demand for the particular item for the next year was both completely unpredictable and wildly variable.
The particular supplier would work out some complicated pricing algorithm where they could quote the military a price for the item in question, knowing that the military may buy zero, and may buy 10,000. This could indeed result in a bizarre unit pricing structure, but was nonetheless perfectly logical from a profit/use of resources standpoint.
Back when I was involved in building race cars, I bought some Aircraft grade you spec exactly what you want bolts. I seem to recall paying $29/ bolt. Of course since two of these held the entire rear suspension on the race car no body complained. 
I also recall buying two toggle switches. Looked almost identical to what you would buy at Radio Shack, or an auto parts store. Except for one minor detail. These were MIL-SPEC switches. When I bought them ($55 EACH :eek: ) I asked for a copy of the MIL-SPEC sheet. After reading it, I think I am safe in saying after a nuclear war, the only things left will be cockroaches, and these switches. Water proof, dust proof, tested for some obscene number of cycles, etc. Brings new meaning to bullet proof.
What about the story about Nasa spending some major amount of money on developing a ball-pen that worked in space - while the Russians used…
… a pencil.
If it’s true, I note that such pens are now for sale all over the world. Nasa probably got their money back in licence fees alone.
ETA: Snopes says False.
They probably did - if it were true. Which it then isn´t (damn Snopes for spoiling a perfectly good party story) 
What Stranger and rbroome said.
I spent the early 90’s doing MIL-STD 810E (environmental) testing for the Army. Equipment had to work equally well from -40 deg to 120 deg F, including dust, mold, solar rad, EMI/EMP, drop, vibration, etc.
We had a delicate piece of electronic equipment that had to survive a fall in -40 deg cold, onto a hard surface (ice). We finally got the Operational people to give us some relief on this requirement. I’m sure the price of that equipment skyrocketed substatianlly due to having to be hardened against the requirements. Not to mention the cost of the testing and development that get rolled into the per unit cost.
I love Snopes.
Sometimes it’s because it wasn’t an off-the-shelf hammer. If a special tool has to be designed, fabricated, tested, and accompanied with a ton of paper that documents that everything was done to government standards, and the government only bought 20 of them, the per-unit cost is going to be obscene.