Where Have All the Underruns Gone Article Discussion Read the Kershner article titled “Where have all the Underruns Gone?” and discuss the following: With

Where Have All the Underruns Gone Article Discussion Read the Kershner article titled “Where have all the Underruns Gone?” and discuss the following: With regard to Kershner’s positions and themes, please respond to his comments, opinions, style, and arguments – Which parts of the article’s contents are outdated? Which are still timely and relevant? What issue(s) does Kershner advocate correcting and what still requires implementation? _________________________________________________________________SPECIALTOPICS
RICHARD B. KERSHNER
WHERE HAVE ALL THE UNDERRUNS GONE?
Hardly a week passes without the newspapers and
the television news programs sounding their shrill
Klaxons about yet another government program that
has been or is going to be wildly overrun. Surely, you
would think, there must be an occasional example of
underrunning. But the word is so little used that it
has a strange taste on the tongue, and you wonder if
there really is such a word.
This is a legitimate question. It is true that many
words containing “over” and “under” come in
matched pairs of opposite meaning. For example,
you can overeat and become overweight or you can
equally well undereat and become underweight; however, by no means do all “over” and “under” words
come in such matched pairs. For example, overhaul,
overlook, and overturn fall out of the dictionary
when the “over” is changed to “under.” A complementary statement is true for undergo, undertow ,
and undermine. And while you can undertake a mission and overtake a Mercedes, these words are hardly
opposite. I hope that is all understood.
But underrun is a perfectly good word and even
has been applied to government projects. The last impressive example that I can recall was the construction of the marvelous Air and Space Museum, which
was brought in, in 1976, ahead of schedule and under
budget. Why then does the word seem so unfamiliar
as compared to overrun, which is almost the household word of the Federal Government or, more properly, of the contractors to the Federal Government?
One simple reason is that, from a taxpayer’s standpoint, overrun is considered bad news and underrun
is considered good news. Bad news is far more likely
to make the papers and the news broadcasts than
good news. Everyone is aware of this fact, and many
people deplore it. Actually, I think it should not be
deplored because it reflects the rather heartening fact
that bad news is still somewhat rarer than good news.
The day you see a front-page headline reading “Girl
Spends Entire College Semester at Midwestern University Without Being Raped,” or “Neighborhood
Store Not Robbed for Third Successive Night,” I
think you could then despair of the state of the
world. And, indeed, if underruns were so common
that they were not newsworthy and this was the
reason for the lack of public notice, all would indeed
be well with government contracting. Unfortunately,
this is not the case, at least with contracts involving
Vo lullle2, NUlllber4, 198 1
some measure of development. The overruns that
receive substantial news coverage are simply the most
egregious cases, and almost all the hosts of other
government development contracts that are carried
out without much public notice are overrun as well,
and a large percentage almost equally badly. The fact
is that underrunning on a government contract is
very nearly nonexistent and for a very si mple reason .
This reason is that, by and large, government
punishes a contractor more severely jar underrunning than it does jar overrunning. At first glance,
this statement sounds absurd, but in fact it is an
almost inevitable consequence of some of the rules of
government contracting, or at least the way in which
these rules are normally interpreted.
All sorts of government organizations, variously
called Departments, Administrations, Centers, Offices, and a host of other organizational subdivisions
of Departments, have the authority to place contracts. For purposes of this discussion, we will call
the governmental structure that places a development
contract with our organization the Sponsoring Agency . Normally one member of this Sponsoring Agency, either a military officer or a civil servant, will be
designated as having the authority to speak for the
Sponsoring Agency on matters involving that contract. Many names are used for this person, such as
Project Officer, Project Engineer, or Program Manager, but again for purposes of generality, we shall
use the phrase Sponsor Representative.
Let us suppose that a sponsor has placed a contract
with the organization in which you work and you
have been assigned the responsibility by your management for carrying out the work involved. You
may be called by your management by a title such as
Program Manager or Project Engineer. Assume that
the contract calls for the development and building
of a device to accomplish some carefully specified
task. If a device accomplishing this task to the complete satisfaction of the government is already in production, then there is no problem because the contractor knows how much it costs to build it and a
fixed contract will be let, usually to the lowest bidder.
However, if development is involved, that means that
nobody really knows how much it is going to cost to
solve the development problems involved and the
contract will be one of a variety referred to as “cost
plus.” This means simply that the government will
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pay whatever it costs you to develop and build the
item plus some specified fee for agreeing to do the
work. This fee may be a fixed, agreed-upon amount
(cost plus fixed fee) or an amount depending on various performance features, such as delivery dates or
reliability of the product (cost plus incentive fee).
To keep the arithmetic simple, assume that the
contract calls for building this specified device in one
year’s time for $10 million. Assume further that after
a few months of work, you or one of the bright
young men assigned to the program get a brilliant
idea that shows how the device can be completed in a
total time of six months for $5 million. I ask you to
think about the consequences of doing this – to your
own future, your own organization’s top management, the Sponsor Representative, the Sponsoring
Agency, the Bureau of the Budget, and Congress.
For your own top management, you have put them
into a very serious hole. They were counting on that
$10 million to pay the salaries of a substantial
number of employees for the presumed one-year duration of the contract. If you complete the job in six
months for only $5 million, they will then have to
scramble for some other contract, which may be hard
to come by in the middle of the fiscal year, or be
forced to layoff some of the people. Don’t be totally
shocked if one of them is you. To assess the sponsor’s reaction, it is important to know that usually
the extra $5 million does not go back to him, but instead goes directly to the U.S. Treasury. There it provides an absolutely miniscule diminution of the national debt. If the sponsor were able to use the extra
$5 million to start some other program he wanted to
do but for which he was not supplied funds by Congress, he might be very grateful to you, but, as it is,
the sponsor has no reason to love you and, on the
contrary, has excellent reason to wish that you had
never been so damn clever. Specifically, the Sponsor
Representative is in a position of being out of a job at
midyear, and somebody will have to cope with this
fact.
The very worst effect of this dramatic underrun
comes about in next year’s dealings between the
Sponsor and the Bureau of the Budget. They are very
likely to say, “You people don’t know how to estimate. You thought that job last year with the XYZ
Company would take $10 million and a year’s time
and it only took $5 million and six months, so we are
going to trim your budget request for the coming
year to reflect your poor estimating procedures.”
Congress is only too likely to support this position of
the Bureau of the Budget. As you can see, it is small
wonder why a substantial underrun of a government
contract simply does not happen.
Overrunning, on the other hand, is a totally different story. Sometime during the year, preferably before next year’s budget requests are in, you tell the
Sponsor Representative that in spite of your best efforts the $10 million will be gone at the end of the
year but the job will not be completed and completion will take an additional six months and $5 mil328
lion. You will, of course, get a tongue lashing and a
letter may be written from the Sponsoring Agency to
your management, but the severity of the tongue
lashing is held in check by the fact that nobody really
believed the initial estimate anyway and there is ample warning to make the necessary adjustment in
budget and personnel assignments in an orderly
fashion. The Bureau of the Budget and Congress will
recognize that it is foolish to cancel the program after
$10 million has been spent, when the job will be completed for $5 million more. There appears to be
almost no limit to how many times this process can
be repeated on a given program; and each time, the
total amount already spent is larger and the absurdity
of cancelling is made to seem more apparent. This
technique, which could be called gradualism, is responsible for the really extreme overruns like the
Shuttle program.
Is this inevitable or is there any way that government research and development could be carried out
that does not severely penalize ingenuity and finding
a better way to do something? The answer is that
there is a vastly better way, which was widely used
for the development of new weapons during World
War II, and everyone who has investigated the matter
agrees that it worked remarkably well. This method
was to assign an organization a broad area of responsibility and a sum of money to support their activities
in pursuit of this broad area for the first year. I
should mention that at that time, the assignment of
the Applied Physics Laboratory was “to protect the
Fleet from air attack.” Under this simple authorization, the Laboratory was able to develop the proximity fuze and gun directors and to begin the development of antiaircraft guided missiles. There was no
punishment for finishing a specific job ahead of
schedule and at a lower cost because the allocated
money remained at the Laboratory so they could simply get an earlier start on the next device in furtherance of the broad objective. This did not remove the
government control in any real sense. If the government was truly dissatisfied with the progress made, it
could always cancel the contract or substantially
reduce the funds the following year. If it was very
happy, it could recommend substantial increases in
staff and funding. It made it possible to base the rewards of the contracting organization on their
proven past performances just as you base the raises
of your own employees on their past performances.
The present system is comparable to a supervisor
calling all his employees together on the first of every
year and saying, “I want you to promise me what
you are going to accomplish next year, and your salary will be based totally on that promise. The date
and consequence of every invention are particularly
important. Past performance is ‘water over the dam,’
and I am not interested in that at all.” If you think I
exaggerate, I should mention that I have been told by
a Sponsor Representative that he was totally uninterested in APL’s accomplishments on any other program since it was “water over the dam,” and only
Johns Hopkins APL Technical Digest
our performance on his program was of any interest.
This statement was made with considerable pride as
if it reflected unusually profound wisdom.
I truly believe that most engineers, and indeed
most people, would rather do a good job than a poor
one. Indeed, there is a glow of satisfaction in getting
a good idea or doing a good job. It is practically a
Volume 2, NWl1ber4, 1981
reward in itself. But a contracting system that seriously punishes competence and ingenuity cannot fail
to produce the kind of results that the newspaper
headlines recount about current governmental research and development contracts. The miracle is
that such marvelous programs as Polaris, Apollo,
and Voyager are ever accomplished at any price.
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