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The myth of the $600 hammer (1998)

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Re: The myth of the $600 hammer (1998)

#141

Post by cbsmith »

mattkrause wrote: post #107
cbsmith wrote: post #39

Earlier quoted context omitted.

> The hammer did indeed cost $435. If the government wanted to buy another one, the contractor would have charged them an extra $435. But the above statement wasn't true.

The article has a nice example of this in the B2 bomber. The first 21 planes cost $2B each. The next one costs $700M. If, for some reason, we were to make a hundred or a thousand of them, the cost per plane would be even lower.

The B2 bomber case isn't a precise analogy. The hammer really was purely an accounting phenomenon. It's not that the first hammer cost $600. The first hammer was part of a collection of goods, of a wide variety of different values, that were billed as a single line item... and this was resolved, from an accounting perspective, as each item cost $600. In reality, most of the items only cost a few dollars, but a few big ticket items skewed the average.

Think of it like you're buying a car, and you have the dealer add in a half-dozen options & extras, and then they bill you for all of them, as a package, as a single line item. If you then said the cost of each item in the package, including the car, was worth 1/7th the price you paid for the package, that would be the equivalent of what is going on here.

Re: The myth of the $600 hammer (1998)

#142

Post by db48x »

lmm wrote: post #140
juhanima wrote: post #50

Earlier quoted context omitted.

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 sou…

> 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.

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.

Re: The myth of the $600 hammer (1998)

#143

Post by zizee »

judge2020 wrote: post #134
Alupis wrote: post #65

Earlier quoted context omitted.

Of course the plaintiffs attorney argued coffee should be lower temperature - it literally was their case. And no, there is no coffee professional (organization, individual, whatever) brewing coffee at 140*F. Additionally - 140*F water is still going to burn if you spill it all over your clothing. Lastly, the customer removed the lid of the coffee while between her legs, which is how the cup was crushed and coffee ra…

The case was not absurd. Even if you think they should be fine to serve it at such a high temperature, she just wanted them to pay $20,000 for her medical bills, but McDonald's used it as a way to cast absurdity onto supposed tort abuse and it worked with most of the population still saying things like "you can even sue someone if you spill your own coffee".

> it worked with most of the population still saying things like "you can even sue someone if you spill your own coffee".

I don't understand how what you wrote gels with the grandparents comment of:

> Lastly, the customer removed the lid of the coffee while between her legs, which is how the cup was crushed and coffee ran all over her.

Re: The myth of the $600 hammer (1998)

#144

Post by lmm »

db48x wrote: post #142
lmm wrote: post #140

Earlier quoted context omitted.

> 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.

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 su…

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.

Re: The myth of the $600 hammer (1998)

#145

Post by aidenn0 »

codeisawesome wrote: post #115
treeman79 wrote: post #90

My dad was in purchasing for various aircraft manufacturers, including McDonnell Douglas and Boeing. It was literally his job to try and keep this nonsense under control. It was extremely frequent that the engineers would request some screw with hyper specific requirements and would end up costing dozens of dollars or so per screw. Even more for the specialized tooling that would go with it. From his perspective, the…

This sounds rather familiar, in Software :)

Very different in software. Many engineers can get away with spending many hours of their time on building software they need, but sure as heck can't unilaterally get the company to shell out a few hours worth of their salary buying the equivalent for them.

Re: The myth of the $600 hammer (1998)

#146

Post by kmoser »

mberning wrote: post #129

Anyone that ever worked for a sufficiently large organization knows that $600 hammers are common, and in the grand scheme of things, one of the smallest grifts possible. I don't want to call it "corruption", but the scale of "questionable waste" within large enterprises and goverment agencies is absolutely breathtaking.

When I worked a company that regularly purchased computers and office supplies from large vendors, the prices were significantly higher than what we could get them for by going down the block to the local chain store.

Re: The myth of the $600 hammer (1998)

#147

Post by kmoser »

aidenn0 wrote: post #145
codeisawesome wrote: post #115

Earlier quoted context omitted.

This sounds rather familiar, in Software :)

Very different in software. Many engineers can get away with spending many hours of their time on building software they need, but sure as heck can't unilaterally get the company to shell out a few hours worth of their salary buying the equivalent for them.

The more relevant problem being alluded to by the parent of your post is that engineers would rather write their own code than find an existing library (which is more often than not free) that does the same thing.

Re: The myth of the $600 hammer (1998)

#148

Post by SilasX »

roflyear wrote: post #121
logdap wrote: post #32

Earlier quoted context omitted.

That's a myth within a myth. The coffee was industry standard temperature, they still serve coffee that hot today (Wikipedia says as much.) The lawsuit was justified though, because the cup design was defective. It shouldn't have collapsed like it did.

Well, whatever the case - the coffee was hot enough to cause severe burns. Why would anyone think it is OK to serve a drink so hot that it can cause severe burns?

Do you apply this standard to tea, which is generally prepared and served much hotter than 140 F (with the understanding that you wait until it cools down to drink)?

https://www.hsph.harvard.edu/nutritionsource/food-features/t...

Re: The myth of the $600 hammer (1998)

#149

Post by db48x »

lmm wrote: post #144
db48x wrote: post #142

Earlier quoted context omitted.

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 su…

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.

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?

Re: The myth of the $600 hammer (1998)

#150

Post by com2kid »

JoeAltmaier wrote: post #17
unreal37 wrote: post #4

The so-called "real" explanation of the $600 hammer doesn't make the story any better. The hammer did indeed cost $435. If the government wanted to buy another one, the contractor would have charged them an extra $435. Just because the extra $420 was "R&D expense" for something else, doesn't make the hammer any cheaper. Even in the most charitable explanation, this makes it impossible to know the real cost of anythin…

I was playing poker with an old High School classmate who worked in Washington. I mentioned my consulting company chared 15% - 25% overhead for project management over what our Engineers got hourly. He laughed, said "In DC that would be 200%" I guess I believe it, from all this.

In Seattle, vendor/staffing companies typically charge a 50%-100% markup, though I have seen 200% at the most extreme.
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