The F-35, Government Contracting, and Business: A Rant

"willkinton247" (willkinton247)
09/04/2014 at 14:29 • Filed to: Rants, Planeopnik

Everyone is aware of how the F-35 program has been marred by missed deadlines, underwhelming performance, outrageous cost over-runs, and hundreds of problems. I have been wondering, why does the government have to pay for those issues?

Is there any other business out there that can say "This will cost this much money and will be ready at this time" and then fail to meet that deadline, and raise the cost, set another deadline, miss that, then raise the cost some more, and then set another deadline, miss that, and raise the cost more, ad nauseum?

If you hired a contractor to work on your house, and they tried to pull that on you, you would either say, "Tough cookies, your ineptitude caused this problem, so you have to pay for it" or, you would fire them and probably sue them.

It seems to me that Lockheed Martin has zero financial imperative to actually build the thing correctly. As long as it keeps breaking, the government will keep throwing money at it to fix it. It's absolutely ridiculous.

The government needs to say, "Look Lockheed, you said you would have this done by this time, and for this amount of money. You failed to deliver on your promise, and therefore you are responsible for this failure, not us. You owe us a working airplane, and we aren't giving you anything else, and if you don't there will be consequences."

Why can't the government put their foot down? Did the original contract agreement basically say "Cost: TBD?" It's absolutely nonsense.

Pictured above: The F-35 doing what it does best: flopping.

EDIT: It looks like they starting to get the idea!

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DISCUSSION (9)

For Sweden > willkinton247
09/04/2014 at 14:31

Almost all of them.

Mattbob > For Sweden
09/04/2014 at 14:34

working for an automotive supplier, I would have to disagree. You get fucking dropped if you cost too much or miss deadlines, and possibly sued if things fail.

McMike > willkinton247
09/04/2014 at 14:35

Kinja'd!!!

Makin' it rain since 2006

For Sweden > Mattbob
09/04/2014 at 14:36

Now imagine you're the only auto supplier who makes the part.

Mattbob > For Sweden
09/04/2014 at 14:39

probably get sued for a monopoly. I get what your saying though.

willkinton247 > McMike
09/04/2014 at 14:48

Seriously, I saw that picture and it was just perfect.

jariten1781 > willkinton247
09/04/2014 at 14:51

In really rough terms (the contracting world is complicated) It depends on the contract. There are Firm-Fixed Price (FFP) contracts that are let, but rarely for new development and production. In those the contractor assumes all the risk for poor performance. Contractors would massively overbid for new development/production if you tried to do that on FFP since the risks are nebulous and extreme.

Usually new development and production are on Cost-Plus-Incentive (CPI) which splits the risk between the Government and the Contractor; I'm not really keeping up with the F35 work but I'd assume they're on one of those now. There the government oversees the performance of the tasks, pays the contractor some fee (floating or fixed), and incentivizes (usually by paying a higher fee for good cost, schedule, or technical performance). If there is an overrun (cost or schedule) it typically (but not always) will lower the the Contractor's fee until the point they are making no profit on the project. There are cost and schedule thresholds established at the beginning of the program which determines when penalties hit.

Even in a CPI the government can rule that the contractor was at fault for an overrun in which case the costs would be solely born by the contractor. This is evidence based and regularly will lead to legal battles, but sometimes it is recognized and the contractor agrees to bear those costs. The assumption is that, since the government agreed to the contract and was overseeing work on the contract, that cost growth or schedule delays are shared burdens.

There are lots of other types of contracts with different risk balances and levels of oversight. You can get 4 year degrees in government contracting if you're really curious.

Chteelers > willkinton247
09/04/2014 at 15:15

Because the customer (gov't) makes several changes during development, making it inherently a moving target.

Flugtechnik > jariten1781
09/04/2014 at 17:38

I think this is a pretty good summary, but doesn't doesn't really drive home the fact that the government is ultimately driving this program. Lockheed isn't the contractor, they are the prime contractor. Did you know that the government required Lockheed to split the development work with other companies and countries like Northrop Grumman, BAE, the Italians, Australia..... I don't know the percentage but probably less than a 3rd of this plane was even designed or built by Lockheed. Who do you blame when parts designed and built by those companies don't work?

I'm also pretty tired of the constant complaining about increases in the price of each plane. The majority of the cost increases are from the government's decision to buy less of them. The cost to develop the plane (which does not depend on the number sold) has to be spread out over the total number of planes sold. The less planes they buy, the higher percent of development costs that must be included in the price of the plane. Say you hire a company to design and build a widget for you. You want 100 of them. It cost the company $1000 to design them and $10 to make them. To make their money back, they have to charge you $20 each. They design the widget for you. Then you say, well, I only want 60 of them. They then have to raise the price of each widget to $27 just to make their money back. The original cost projections of this plane were based on the governments request for thousands of them.

I'm not trying to say their isn't anything wrong with the JSF or the program, but this plane and the entire program are mind-bogglingly complex.