Over budget

Discussion in 'Current Affairs, News and Analysis' started by bensonby, Jul 7, 2008.

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  1. Yet more stuff goes over budget and taxpayers will foot the bill:

    http://www.guardian.co.uk/politics/2008/jul/07/transport.localgovernment?gusrc=rss&feed=politics

    We've seen loads of government schemes go over budget under Labour (the olymics, the dome, various defence contracts) and we, the taxpayer, ends up footing the bill more often than not. While the shareholders and directors of the private companies involved get richer.

    I'm not an economist, so I don't understand all the nuances. However, if I employed you to fix my window and we agreed on £100 - you would be receiving £100 when the job is done - no more, no less.

    If I went to a restuarant and ordered £20 worth of food off the menu and then I was presented with a bill for £30 I would politely tell the waiter to fook off and leave a £20 note and not return....

    Now, why doesn't the government bloody well agree a price upfront, pay the company to do the job and leave it at that....making the company legally obliged to do the job for the amount that it has been paid for?

    It does seem that the leaders of these companies are just sitting in their offices rubbing theit hands and laughing at us. Knowing full well that they can increase the bill as and when they feel like it...
     
  2. msr

    msr LE

    Because companies are in business to make a profit.

    If they can do that by fleecing the government (which is a very easy way to make an awful lot of money) then they will.

    Simple.
     
  3. And nowhere is that more prevelant than the defence industy as far I can see - the prices we pay for some sh!t astounds me!

    But, like MSR states - if some clown is going to give you more money cos you went over time/budget - what you gonna do, turn it down? You wouldnt have a job for long - especially at the kinds of sums we're talking about.
     
  4. What also grips my $hit is that teh government constantly award contracts to the same companies that ripped them off previously....."crapita" anyone?

    If I received a pisspoor service from a company I'd take my money elsewhere...
     
  5. I know where you are coming from but as you'll be aware, it aint as simple as that.

    Take defence procurement for example.

    We chuck out a requirement for a bit of kit. Industry come up with the widget to satisfy the requirement. We have a look at the widget and choose the 'best'* company. The initial price is set and a contract drawn up to buy x amount of widgets and set a date when it should be in service. Halfway through the process, we decide that we want the widget to be slightly different. The company now charges us a little bit more for going out of contract because we've changed it. The company know that we dont know our arse from our elbow due to the people we put in project/procurement jobs for only a couple of years. Of course industry knows this because most of the blokes flogging us kit have done those jobs whilst serving. The company adjust the price due to a shortage of flange pumps from Macedonia and the cost goes up. They know we know fcuk all about flange pumps so they cream a bit more dosh. We then change yet again what we want and the cycle continues. Due to design changes, the in service date changes and the cost increases. Eventually we actually get the widget. It doesnt work properly, costs 4 times as much as the originally quoted price and is already out of date because it took so long to build the bloody thing.

    That process is of course much simplified and can be read across to any government type project. Any government contract is a golden goose cash cow cash machine for any contractor. They know that most of the people in the jobs arent good enough to be in the private sector so kick the arse out of ripping everyone off.

    Think of it this way. If you let a women go to a car showroom and order a car, it would cost a fortune. The dealer would rub his hands that the doris wouldnt have a clue. He'd sell her what he wants and not what she actually wants. Once she'd ordered the car and put a deposit down, she'd change her mind and want it a different colour and want the sun roof removing, oh and want the estate converted to a saloon. Clearly the dealer will shove the price up because its going to cost him money to change it. He's laughing and she drives off in a Trabant costing as much as a Bentley.

    Thats how it is and I dont think it will ever change.



    *Best= One with the most former retired Brigs/Col/Gens on the board of directors.
     
  6. I know I grossly over simplified it - and I appreciate your explanation is a simple version too.

    I'm not blaming the companies for making a profit - that's what they are there to do. I'm blaming the government; they are the ones whobugger the process up - by allowing themselves to be ripped off for starters and then changing their minds every 30 seconds.
     
  7. You need to look at the sort of people in government. That alone would answer your question.

    I wouldnt trust any of them to buy a bag of sweets without a chaperone or the exact change.

    The government buy stuff for political reasons and not because its useful, good value for money, fit for purpose or well made. That pretty much sums it up.
     
  8. They seem to manage in other areas - I've been in some of the bars in the HP and they are very good value and very well stocked!
     
  9. In reality it has less to do with political motives or profeteering by contractors and more to do with the physical administration of the contract. In many cases, a contract suite is selected for a job inappropriately. For instance, the mersey gateway was a Cost Reimbersable contract, that is similar to a cost plus but with greater controls on spending. The mistake was made in treating the contract as a cost plus. In reality, a target cost would have been more practical. Its easy to jump up and down and scream about political incopetance without thinking about whats actually happening. Often the political spin comes at the estimation end. IF a local authority said, we want to build a road that will cost 1.1billion, there would be severe hostility, so they run the cost down to please the public, hence the need for open ended contract suites. Its nice the think that ZanuLabour are running around major construction sites in the UK, blatting out orders and generally fcuking things up, the reality is sadly much more mundane.
     
  10. mysteron

    mysteron LE Book Reviewer

    You must remember that the MoD and many other Govt departments have a propensity for change that is unsatiable. They can't help but change requirements halfway through and then wonder why it is later on delivery than the thing they ordered in the first place.

    Don't get me wrong, the pace of life today is far greater than 10 or even 5 years ago but multi-billion dollar companies who influence world politics and have a larger GDP than most African nations also have similar procurement demands as Government. The main difference is that these companies are not held accountable by the shareholders as long as they are making the bottom line, Government is accountable as it is our money they are spending.

    That is why business succeeds where Government fails. The greatest irony of all being that if we did not spend quite so much money on checking that all was good on Govt projects but that most was good, the deficeit would even out and the right product might come out more often!! The most successful OGC style projects have been the small ones because they had limited budget and time constraints. The requirements were clear and the supplier delivered.

    The big projects always overrun and overspend because people have to meddle with the design because they think they are more clever than the other guy. Result: Scope and requirement creep = overspend and overtime. Supplier rubs his hands with glee and takes the money whilst offering some consultancy to tell them where they went wrong.

    The other thing is that Govt departments are cr@p at commercial stuff. They agree to contracts that don't have a hope of making the schedule the supplier is trying to sell as a deal winner. That also means that it goes over time and guess what that means.....yep - more money being spent on that supplier as the Govt is fixed with that contract and dare not back out.
     
  11. Thanks for the explanations - as I said, I'm no economist / financial consultant.
     
  12. msr

    msr LE

    Don't worry, neither are those in government procurement ;)

    msr
     
  13. Forgive me for being simple here, but wouldn't the sensible solution be to do thorough research on requirements for the widget, settle on the wish list and then lock the design spec so nobody can tamper with it and thus run up extras?
     
  14. mysteron

    mysteron LE Book Reviewer

    Juvenal - you would not believe how many processes out there say exactly that. But they still break the rules and that is why the get a busted flush!!
     
  15. msr

    msr LE

    Yes it would. Trouble is no-one seems willing or able to do that.

    And don't forget many of these projects do not operate in a vacuum - they have dependencies on other projects and resource (read budgets) pools.

    msr