[juhanima]

The article is not quite clear why the contractor had to split the intangible goods cost to the tangible ones, but it does give a hint. Federal accounting is meant to prevent possibly corrupted overspending and that's why charging for intangible services is not allowed or made more difficult than charging for something tangible that can be measured and counted afterwards and compared to market prices.

So to me it sounds like this: you hired me to make a wall of bricks around your garden. I did it and presented you a bill: bricks 100$, mortar 20$, work 300$. Then you say I cannot charge for work as that's intangible and I have to restructure the bill by allocating the cost of work to the tangible objects. So instead of charging for work I split the cost of it by two and charge a bricklaying fee of 150$ divided by the number of bricks for each brick and another 150$ for mixing the mortar. Because I'm pissed off by your awkward and unpractical accounting requirements and not going to start figuring out more complex ways of dividing the cost between the materials, when everybody knows that it's the bricklaying that counts and not the bricks or mortar.

And that's how you get very expensive mortar or 600$ hammers.

[lmm]

> Federal accounting is meant to prevent possibly corrupted overspending and that's why charging for intangible services is not allowed or made more difficult than charging for something tangible that can be measured and counted afterwards and compared to market prices.

Right - so if contractors are doing an end run around those requirements by padding the prices of hammers or whatever, that's a problem.

[db48x]

No one is saying that it isn’t a problem.

But there is an additional problem when a congresscritter makes a big song and dance about the “$600 hammer” and uses it as an example of government waste instead of using it as an example of dubious accounting that could be used to hide waste but probably didn’t in this case. This article is about the mythical costs and how they have mundane explanations that don’t really support the song and dance.

[lmm]

I don't see a problem with a congressperson taking the accounting at face value and assuming it means what it says. Our accounting should be trustworthy.

[db48x]

It was purely a stunt for the congresscritter in question; they were not fooled into thinking that the hammer had really cost that much. If they had been honest, they would have talked about how the repair kit cost a lot of money, and tried to figure out if it had been worth it. Along the way they could have discussed the accounting fiction by which the cost of assembling the kits from bulk purchases of common tools such as hammers and screwdrivers had been baked into the prices of the items themselves. But since all they wanted was soundbites for television news shows to repeat over and over, the simpler and more emotional narrative was what worked best for them. They created the myth in order to profit from the outrage that it generated. Sound familiar?

[dmurray]

If their point was to protest the poor accounting practices, calling attention to the more ridiculous consequences is a good way to do that.

Likewise, if their point was to protest potentially wasteful spending and fraud. Even if they couldn't be certain there was waste or fraud because of the lack of transparency in accounting, it's fair for them to call attention to the accounting practices by pointing out how they appear to imply waste and fraud.

[db48x]

You’re inventing good motives that didn’t exist. The hammer was merely a bad example of government waste. Government waste certainly exists, but this was a flawed example. The congresscritter found the flaw useful, nothing more.

[lmm]

> It was purely a stunt for the congresscritter in question; they were not fooled into thinking that the hammer had really cost that much.

As far as I can tell the hammer "really did" cost that much in every meaningful sense. The government's accounting said they'd paid $435 for a hammer and they didn't have a problem with that. Whether the government was getting ripped off by some dude buying a hammer at a hardware store for $10 and selling it for $435, or by some lab doing unbudgeted R&D and concealing the cost of it in the hammer invoice, is not really here nor there. It generated outrage because it really was outrageous.

[db48x]

No, it really wasn’t outrageous. It was bad accounting, but not an outrageous waste of money.

They were essentially building repair kits that could be shipped off to military bases and used to maintain particular pieces of equipment. The contractor bought the tools and spare parts in bulk, marshaled them all at some warehouse somewhere, and then broke down the bulk items into individual kits. A palette full of hammers got broken up so that each kit had exactly one hammer. The same has to happen for all of the other tools and items in the kit.

That’s a useful service and it is definitely worth paying money for. If you want a good example, check out this video: https://www.youtube.com/watch?v=FxBgTDpsUC0. You can see how this would be used: in the 1940s the army was setting up bases everywhere, and they all needed to communicate with each other. So obviously you ship out teletype machines, a repair kit or two, a pile of manuals, and a platoon of Signal Corps engineers to keep the teletypes in working order. The kit is mostly common tools, but if every base had to order every one of those items individually then it would be chaos. Logistics wins wars, and this is a very good example of how.

Then whoever did the bookkeeping recorded it as if they had purchased COTS items each with some normal price, instead of doing it as a contracted service with both material and labor costs. You see how one bookkeeping method can be used to generate outrage for political gain, while the other cannot? It was an entirely cynical manipulation on the part of the politician(s) in question.