US Defence: Consumers get cheaper IT than us

By Liam Tung on Sep 16, 2010 6:33 AM
Filed under Strategy

Diseconomies of scale.

Services and IT companies hoping for a slice of the US Department of Defense's US$200 billion annual spend on support systems faced a tougher and more competitive bidding process, which US Defense secretary Robert Gates hoped would save it US$100 billion.

Gates on Tuesday lamented the Department of Defense's exclusion from falling prices for information technology gadgets.

"Consumers are accustomed to getting more for their money - a more powerful computer, wider functionality in mobile phones - every year," he said.

"When it comes to the defence sector, however, the taxpayers had to spend significantly more in order to get more. We need to reverse this trend," he said.

Gates had been hunting for US$100 billion in savings over the next five years from its war fighting and administrative costs.

Annually the US DoD spent some US$200 billion of its US$700 billion budget on information technology and its maintenance and professional services.

The secretary said that it wanted to structure its bidding processes to replace phoney with real competition.

"Beginning today, we are implementing a number of measures to improve efficiencies in the services-contracts area, including especially increasing the rates of competitive bidding," said Gates.

US Defence: Consumers get cheaper IT than us

3 comments in this discussion

"@Graeme Harrison (prof at-symbol post.harvard.ed We have a similar issue here in Australia with the government being over bloated with bureaucracy (for this reason projects that the government ..."

By deteego

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Comments: 3

David Vidos Sep 16, 2010 1:28 PM	The reasons they pay more is that their expectations are higher. They usually want it on a specific date, and expect that it is more secure, validated to work with a specific set of peripherals and software, a higher level of warranty, and with ready to go replacements. If they want to get consumer pricing then they will get a consumer product and the support that goes with it, but when your talking about the security of a nation I don't think they should be looking at saving a penny. Even if it is a large sum of pennies.
Graeme Harrison (prof at-symbol post.harvard.edu) Sep 17, 2010 7:37 PM	I beg to differ with David... It is NOT about a difference in specs - it is ALL about red-tape of dealing with government. And the problem affects all governments at all levels. Someone thinks it would be good to set-up a panel to consider suppliers, and all of a sudden there is a gynormous impediment to doing business - only very large companies can offer what turn out to be very simple things. I remember some years back when US Defence claimed that they paid US$500 or some-such large figure for a toilet seat under a supply agreement, when the same thing could be bought at a local store for $25. The one things bureaucracies are hopeless at is knocking down the walls the eager underlings continually seek to build. Instead of writing a million terms and conditions into each separate contract, and expecting every bidder to specify their corporate commitment on not employing under-age children and a hundred other 'obviously unacceptable' items, why not just have a single web-site (in Oz on Fed Attorney General site) that notes (from time to time) provisions of government supply contracts, and then go with short-form tender forms. And for simple things (like toilet seats), again allow people to buy things from the cheapest local source, if their manager signs off on it, noting that he did not think anything would be saved by buying from a national supplier. Such a provision would have a natural effect of preventing national suppliers from having outrageous costs of supply.
deteego Sep 17, 2010 10:43 PM	@Graeme Harrison (prof at-symbol post.harvard.ed We have a similar issue here in Australia with the government being over bloated with bureaucracy (for this reason projects that the government runs end up costing multitudes more then if done by the private sector)