Quote:
Originally Posted by philipswanson
I worked at North Island Naval Air Station where the $600 hammer, ash trays and toilet seats were manufactured. The cost had little to do with tolerances. 95% of the costs were for overhead. These items had to be designed, approved by engineering, tooling made, material ordered and a learning curve out in the production shops. For low quantities, cost would eat you up.
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I have been directly involved in a lot of this. Lets take a hammer as an example. You see one in a store and it has a mass production price. Now the government decides to order say 100 hammers built to a specific requirement (may not really matter, but that is the way they operate).
First you get a request for the item. Then it has to be reviewed and negotiated. Engineering has to write up a specification. The specification has to be reviewed internally and with the government and approved. This specification is summited for bids. The bids are reviewed and then there is negotiations with the manufacture. Now engineering has to write up acceptance testing procedures. The next steep is the actual testing and acceptance. This results has to be documented and submitted to the government for approval. All the while the legal deportment and procurement departments have to be reviewing all of this. Then there is shipping cost. And the big one is YOU, the provider, are liable for any and all incidents that might occur when using the item.
Add all of that up and divide by one hundred. The fact is the items are being sold for way under the actual cost. So way do it at all? It was considered just part of the job, good will, whatever, to go along with much larger contracts.
When all of this started making headlines we just started refusing to provide any item that the government could purchase for another source. It was a big cost lost in the first place!
Some of the government requirements were very specific, such as a tool could not produce a spark. When CRT tubes were being used, we had to warranty any damage to an aircraft or personnel if it ever exploded. If you have never conducted business with the government, you have no idea how difficult it can be. I would not sell hammers to the government for 10x the $600! And that is what the company finally decided as well.