[jandrewrogers]

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.

[gregwebs]

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.