My experience with Defense Contracting, particularly small batch orders, is the bulk of the “cost over runs’ are caused by the military project managers.
For some reason, excessive ego (based on rank?), the project managers are unable to keep their hands off the SOW and other contractual devices. They ignore the fact that almost every change means changes to hardware already completed plus changes to hardware on the assembly lines. That’s where the cost overruns begin.
Add to this such detailed requirements as “equal to or better than ...” and over runs are built into the system.
The final nail is there is no punishment for badly managed programs in any service. When was the last time you heard of a program manager being recalled to active duty and reduced in retirement grade because his program was so badly managed - late, didn’t meet specifications, and cost 10 times the budgeted amount? Think LCS, F-35, and the Navy’s newest destroyer.
For some reason, excessive ego (based on rank?), the project managers are unable to keep their hands off the SOW and other contractual devices. They ignore the fact that almost every change means changes to hardware already completed plus changes to hardware on the assembly lines.
That’s where the cost overruns begin.
BINGO!
I watched that happen with almost every major acquisition. The contractors try their best to give a real bid derived from the Statement Of Work but, after the contract is signed, the military geniuses immediately start adding and subtracting items and performance specs that forces the contractors to redesign and recalculate costs.
That is also when the contractors try to pad some extra profit but the bulk is due to the huge changes the DoD asks.