I used to work at an org that audits defense programs. A surprising amount of the unreasonable cost is self-inflicted, which is a valid cost to the vendor. If it wasn’t, the auditors have the power to clawback the excess cost.
In defense procurement the costs are frequently inflated greatly by the procurement process overhead and the government imposing last minute changes of scope, requirements, or delivery dates. The government customer is also often slow or delayed on their contracted deliverables, so they can end up spending a lot of money to essentially keep idle capacity warm on the vendor side while they sort out delivery of their part. And then there are the budget rug-pulls at the 11th after the vendor has already committed significant internal resources, which are often a pure loss to the vendor. All of this is endemic to the process. The government knows they are a difficult and expensive customer to work with, and they do try to compensate vendors for the overhead costs this imposes.
People like to talk about $2000 hammers etc but if you actually look at the audits, more often than not the cost was justified. Not because a hammer should cost that much but because that is how much it ends up costing after you account for the government procurement process overhead and the way in which the government executed the contract.
Sometimes this gets taken advantage of by the vendor. The government doesn't have the ability to design and specify things properly themselves when the deal is signed. The vendor might know that things are wrong at that point but wait until afterwards to point out all the problems and correctly claim changes in scope and requirements at significant expense. At least I was told that happened on the California rail project.
Just that in this case the end-customer is a person that could shop around for what he/she needs. Such a competitive market would instantly vaporate the current, rent-seeking margins
so that's the secret side hussle that all the senators and congressmen get rich off of. forget insider trading and shady political contributions, bushings are where the money is at lol
Any idea if they're precision engineered out of something exotic? Maybe machined from single-crystal titanium or something.
Asking because there's a bit of a different between standard consumer grade stuff, and specialist high performance things designed for a specific exotic environment.
Also each one probably also has its own fully traceable and auditable supply chain, with a record of every step, including who signed off on it, when and where, from the moment it entered the refinery, and the records are guaranteed to be kept available for decades, along with storage and maintenance of the tooling and capacity to make more at short notice indefinitely. Plus the costs of getting the contract sorted and the part specced and signed off on in the first place, amortised across the relatively small initial batch.
Presumably there for political protection as much as anything else: "Bushinggate topples Senator after it's revealed a Russian company supplied the titanium" or "Scandal of the aircraft parts Anerica has forgotten how to make".
Funnily enough, although the SR-71 was largely made of Soviet titanium, Russia's not a major producer now (Ukraine is now a relatively minor one, perhaps it was from there). But they got out in front of that one post-declassification with the rather fun spin "har har, they thought we wanted it for pizza ovens and we put it in a spy plane to fly over their country, the absolute rubes".
I think his argument was that the alternative on the free market met FAA standards, which are in his words, the most audited parts in the world, and were a fraction of the cost
So just because something meets a particular level of FAA compliance doesn't really speak to whether they'd work properly on the example "fighter jet" (potentially needing much higher performance).
Sounds like the guy was trying to do a populist pulpit style smoke-and-mirrors kind of thing?
Though if you can follow up and get the details of what type of fighter jet, and what type of bushings he meant (good luck with that! ;>) maybe that guy will turn out to be the first politician in history that's not completely full of crap. :D
Regulatory capture is likely the most important component. People complain about government spending, but those close to progressive issues can tell you that it's just as likely, if not more likely, to be remarkably stingy when it wants to be. The issue isn't government, it's who's using government; access to capital on top of that government influence gets you a lot closer to that bottomless wallet.
> The issue isn't government, it's who's using government; access to capital on top of that government influence gets you a lot closer to that bottomless wallet.
One issue is a big disconnect between user and payer. Government is especially prone to that, but any big organisation can have this problem.
This is why I'm for total deregulation of healthcare. Government fucks it up so bad hamstringing access that some hack work with 15 minutes of YouTube training plus whatever pills drop out the dark web is often better than not being able to access it at all.
Right now we basically end up going to Mexico if we can help it, where there's basically no real oversight or regulation to raise cost so long as the doc/pharmacy pays off the cartels.
This doesn't really work. An unregulated market has every opportunity to undercut a regulated market in almost every dimension. Do you expect that a highly regulated market would become sustainable let alone affordable? You may as well just demand that regulations are removed.
The only way this works is if the government subsidizes the regulated market such that it is accessible (and sustainable) to an appropriate market. It also generally puts some populations at severe disadvantages, and usually those populations are disadvantaged to begin with.
This may seem good to you but, unless your fellow man is equally wealthy, it is problem detrimental to your fellow man.
If you play the idea out (I’ve thought about this for years, perhaps you have fully considered it).
I think this works for people of all economic backgrounds.
There would be multiple competing standards for lower cost businesses, will the low standards business exist if people get sick, or will a slightly higher priced but much safer low cost standard excel in the market?
I think many of the issues you bring up already exist in the current market.
That's why I am in favour of more city states like Singapore, or at the very least towards pushing more responsibilities from the federal level to the state level. (The Catholics and EU call that concept 'subsidiarity', handle everything as locally as possible and have the higher levels only there to help when the lower levels can't handle it.)
Eg the FDA ought be to dissolved, and replaced with state level agencies. The state level agencies are, of course, free to cooperate and coordinate. Comparable to how the traffic signs work already in the US.
It's good for Hawaii and New York to have the same road signs, but they can agree on that voluntarily. No need to have a central party force them. Similarly, it's good for both states to have the same or similar rules on drugs, but no need to force them.
See also how the recent wave of cannabis legalisation has been driven by the states. I want to see more of that innovation and experimentation.
> I want a market where I can choose a highly regulated healthcare system or a system with no regulations and a system somewhere in between.
In what I suggest each state would most likely still have mandatory regulation, but it's a lot easier to move between states to find a place that suits you best, instead of moving between entire countries.
I have lots of sympathy for your position, and I would hope that at least some states would take a more laissez faire approach. But the policies you get will ultimately still be decided by what's popular with voters, and they can be a fickle bunch.
> Similarly, it's good for both states to have the same or similar rules on drugs, but no need to force them
I can't wait for drugs having to be certified safe in 50 different jurisdictions, instead of one, with 50 different agencies, each with a different set of politicians putting their thumbs on the scale having their own rules for them.
That'll really bring down medical costs, and will not at all destroy the incredible economies of scale that a single 350 million person national market creates.
I also can't wait for the cross-state litigation when an upstream state's equivalent of the EPA will be paid off to allow a firm to dump toxic waste into a river, that will be poisoning the people downstream.
States can voluntarily choose to have a unified certification process, exactly to enjoy the economies of scale you are describing.
> I also can't wait for the cross-state litigation when an upstream state's equivalent of the EPA will be paid off to allow a firm to dump toxic waste into a river, that will be poisoning the people downstream.
How much is that happening between eg Canada and the US at the moment?
Yes please. We don't need to get rid of the FDA, just make it optional. If I want to trust the government's opinion of a doctor or drug, I can look for the FDA seal of approval.
> This is why I'm for total deregulation of healthcare.
Is that a good idea for an industry that seems filled with completely immoral bastards that'll screw over everyone ("they'd sell their own grandmother!") to make an extra cent, or save themselves a cent?
I could see it might be a good thing where an industry has a good reputation for fair dealing. US health care doesn't seem to fit that description though.
People assume this serves no-one, but a well heeled public servant with good insurance (or some other member of our new moral rulers) might think it's a fair deal, especially if R&D is amorised by having poor people also forced to pay. They would pay a bit more for the extra safety.
In defense procurement the costs are frequently inflated greatly by the procurement process overhead and the government imposing last minute changes of scope, requirements, or delivery dates. The government customer is also often slow or delayed on their contracted deliverables, so they can end up spending a lot of money to essentially keep idle capacity warm on the vendor side while they sort out delivery of their part. And then there are the budget rug-pulls at the 11th after the vendor has already committed significant internal resources, which are often a pure loss to the vendor. All of this is endemic to the process. The government knows they are a difficult and expensive customer to work with, and they do try to compensate vendors for the overhead costs this imposes.
People like to talk about $2000 hammers etc but if you actually look at the audits, more often than not the cost was justified. Not because a hammer should cost that much but because that is how much it ends up costing after you account for the government procurement process overhead and the way in which the government executed the contract.