One more thing on the debate…

Here’s something I’ve not seen McCain called out on anywhere, that I may be able to shed some light on due to my profession:

Did you catch the part where McCain said he wanted to eliminate cost-plus contracts from Defense acquisition? He said that everything can be awarded for a fixed price. This is more naive than anything you’ve ever heard come out of Obama’s mouth.

It’s never going to happen. Lockheed Martin, Boeing, Northrop Grumman, General Dynamics, Raytheon, KBR, L-3, etc. will not submit a fixed price bid for any sort of lengthy program with many complex variables (and requirements that keep changing). They’d be crazy to, unless the Government was going to renegotiate the contract every time the price changes, which is worse than having a cost-plus fixed fee contract in the first place.

There’s no way they can accurately estimate every potential future cost over the life of the contract, so they are not going to assume the risk of committing to a truly fixed price. Maybe they could build in a ridiculously high profit rate as a buffer for unanticipated costs, but how is this any better than having a cost plus fixed fee contract with adequate Government oversight to proactively identify potential cost overrun situations?

It’s not the contract type that’s a problem, it’s the lack of clear and unchanging requirements at the start of the contract coupled with poor or nonexistent Government cost surveillance over the life of the contract. The Government is a full partner in this…they wink at the contractor lowballing the costs at the start, though everyone knows it will end up costing ten times that much.

And the Government does the exact same thing in estimating the cost of anything. Did anyone think Bush’s estimate for the total cost of the Iraq war was anywhere in the ballpark? Or that the $700 billion quote for the bailout plan has any basis in reality (they are putting out $370 billion in the first two weeks under the current plan)? Maybe Maverick McCain should have insisted on a firm fixed price there, too.