Why does DoD equipment have a conflict of interest with reliability?
I posted an article recently by Bloomberg on the Defense Department’s recent disclosure of the escalating support cost of the F-35 Joint Fighter Jet. With over 3,700 views, it was the most read of my posts. The original article on escalating F-35 reliability costs can be read at this link
I posted the article with the comment: “Once a test engineer working for a large DoD contractor once told me at a reliability conference, ‘These new reliability development techniques of HALT and HASS would be a lot easier to implement if spare parts and service did not constitute 60% of the total program profits.’ That was not the first time I have heard a similar comment from a test or reliability engineer or manager working in the defense industry. I believe these engineers working on the reliability end of the programs said these concerns me out of frustration.
This is Not New News
Looking at LinkedIn’s metrics on the post show that large number of the views (91) were from DoD contractors Boeing, Lockheed Martin, and Northrup Grumman. I can’t imagine that this is new information to those involved in government procurement of defense systems.
If what the engineer said regarding the program profits is true, then the DoD contractor has a built-in conflict of interest. By making the system reliable initially during development would reduce the program’s profits significantly. Making the sales spare parts and service a profit center is a direct conflict of interest with making the systems reliable. One engineer commented on my LinkedIn post, “I heard something similar from a company president once – make it reliable, just not TOO reliable.”
Lack of Failure Information
No one can publicly provide details of the causes of failures of these highly classified military systems, so we do not generally know if the causes are due to poor design or poor manufacturing or a combination of both. This is not restricted to military programs only or the government, as the cause of failures in any hardware systems is almost always proprietary and never disclosed in commercial and consumer products either. Lack of widespread shared knowledge of the causes of failures of electronics has prevented change in reliability development based on empirical causes. This will not change and I have written about this challenge before.
In the open market for consumers and business, where there is real-time competition and choices between companies, drives businesses to produce a reliable product. Today consumers have almost instantaneous feedback on the quality and reliability of products through the internet and organizations such as Consumers Union. Almost all internet markets, such as Amazon and Google provide product reviews from customers. It the product is not reliable, thousands or millions shopping on the internet will know, and avoid purchasing that brand.
It is highly unlikely that the reliability of systems reliability of systems from DoD contractors will not change if most of a programs profits are dependent on the sales of spare parts and service. This will not be easy or simple to change.
To solve this reliability development conflict of interest, the government contracting system must tie higher profits to the contractor if he provides a system that requires less service and spare parts costs, in other words to monetarily reward the DoD contractor for robust and highly reliable systems. It won’t be easy.
Massive conflict of interest needs a new model as you point out.
Contract should be for the useful operational hours of the equipment, purcase them on a lease basis with the supplier responsible for the OEE, that would concentrate their minds!
Best regards
Andy
Thank you Andy for your comment,
I agree with your idea of leasing and putting the costs of unreliable systems on the supplier. As I wrote, it will be a tough challenge to change the US defense contracting culture.
You are correct. There is a huge COI. As an owner of a company that focuses on fixing this very issue in the DoD, and having served over 20 years in DoD acquisition of aircraft, I have seen it firsthand for decades. Unfortunately, you are only addressing a third of the problem. There are two other groups that have COIs contributing to this phenomenon.
One of the first things that must be done is to track all assets by serial number using existing IUID technology. Then you can track the operational reliability of each asset so that there is traceability and accountability. Just try and make that happen (as we have), then you will start to understand the true resistance to meaningful change in this area. It’s deeply institutional.
In the end, the men and women who put their lives on the line every day in defense of our country — the Warfighters — are the victims.
What is amazing, is how well our Warfighters do in spite of this. I guess we are fortunate that our adversaries have this problem worse than we do.
P.S. We have plenty of data on the root causes of this lack of reliability in military systems.
P.S.S. There are some champions emerging from within the DoD, slowly but surely.
Thanks so much Kirk. I think you have some very good suggestions. It is great to have input from persons who have much deeper knowledge of the details of the problem.
I am glad to hear that you know of champions that are trying to make a change. We have to keep moving to a new methodology as technology changes so quickly.
Find the weaknesses through finding limits, and then determine the potential change and costs to make it more robust.
Great article and podcast. I totally relate to the issue of wilful poor product reliability. (Wastewater treatment sludge centrifuges are causing my plant lots of issues). After the episode I googled “uptime based maintenance ontracts” and found this article.
http://purl.tue.nl/388700800637321.pdf
I am new to maintenance and reliability but I can’t help thinking that these arrangements exists. Next centrifuge equipment contract we should be getting something like SaaS (software as a service). Lease the equipment and have the supplier maintain it to agreed uptime KPIs.
Does this happen in other industries?
Thanks Michael for your comment and link to a good paper on uptime based contracts.
I looked at the paper and wondered about the challenge of the service provider sometimes dealing a customer caused special cause failure. An example would be a worker dropping a wrench (accidentally of course) into a open gearbox. The service provider would most likely exclude this special cause event in the contract, and some failures could have both the workers and service provider could be partially to blame. That would also be the larger challenge with the agreed uptime KPI’s, as in is to blame for special cause failures? It could determine who got the better financial deal.
One way to improve the service reliability would be to contract based on total lifetime cost. If the cost of repair and service is too high, then the supplier would be responsible for the excess cost. A difficulty would be establishing reasonable total life time cost. Initially, they would be generous, but need to include a warranty system to summarize costs.
Thanks Dennis for your comment.
You are correct that establishing a reasonable estimate of total life costs for maintenance and spares would be challenging. Also there would be an issue of what is “normal” and what may be considered customer or user induced damage or misuse and who will pay for failure in those circumstances.
Perhaps the DoD should start tracking the lifetime cost of major systems. This would provide a database for a future contract process that includes lifetime cost limits. If the individual cost elements are monitored, then focus on the highest cost elements first. They could start by barcoding expensive complex parts. Track replacement cost, repair costs, inventory costs, …