It is commonly understood that the United States government pays hand over fist for even the most minute product, regardless whether tangible or otherwise. I grew up hearing stories about nuts and bolts for production aircraft purchased by the Air Force costing thousands of dollars when the company should have charged the government orders of magnitude less. Even after being bombarded with story after story, I chalked it all up to competitor jealousy.

My entire perspective was forever changed after I started working with the government as a contractor for the United States. Even though I was in the Navy for almost 9 years, and worked hand-in-hand with many contractors, I never really was privy to what you see when you work directly for a company who has a contract with the government, especially the Department of Defense.

I worked as a government contractor from the moment I separated from the Navy up through 2008. A roughly 9 year period (I know, what’s with the nines?) as a contractor really opens up your eyes, especially working in the Information Technology (IT) industry.

IT contracting is essentially a services market, where service providers bid on various technology service contracts, with the winning company providing personnel to perform required services. For example, a company may provide bodies to a Help Desk, a Field Engineering unit or any number of IT service positions.

The government forks out a boatload of cash to a “prime,” a Fortune 500 company, who then partners with a small company, to provide services required as stipulated in the contract. The fleecing is not necessarily with the contracting of IT services to private firms, but the manner in which the government ultimately awards the contract.

All things being equal, two companies bid on a contract to provide IT services. The two proposals are essentially identical but with one major difference: company B stipulates it can perform the work with the same number of people as company A but for $10m cheaper.

In almost every case, without taking in to account anything except the dollar figure, the government will award the contract to company B. All the government sees is a less expensive alternative. There is rarely ever true due diligence done on the contract proposals. If one company can provide the required services at a less expensive cost then by god they must be the right company for the job!

Surely, at this point you are asking yourself, “so what the hell is the problem? As a taxpayer I would rather award the bid to the less expensive alternative.” When was any cheap product the stronger, longer lasting, ultimately less expensive solution?

Cheap tires are cheap at the register. But when you purchase the same set of cheap $200 tires once a year, for 10 years straight you have just expended $2000 solely on tires. Had you opted to fork over $500 for the more expensive tires, which ended up lasting 5 years, you would have saved $1000 at the ten year mark.

Unfortunately, the government does not see this as a viable strategy. If the bottom line on a contract proposal is less expensive than all the competition, the government immediately jumps on it, without ever taking the future in to consideration.

This is an unfortunate and detrimental strategy for a number of reasons, and on a number of fronts. I plan on expanding on this theme in the future, to better convey why the government is wasteful and what can be done to prevent such waste.

In the meantime, is it any wonder that our deficit is so huge these days, and that stories of $1000 bolts continue to propagate throughout American culture?