b'LEGAL COLUMNPROCUREMENT PERSPECTIVESGovernment procurement concerns related to cost overrunsBY STEPHEN BAULDThe following article originally appeared in Daily CommercialIn that project, the development of the Master Test Plan News. It is reprinted in its entirety with permission fromlagged well into the production phase of railcar assembly. The ConstructConnect.completion of prototype vehicles was delayed significantly and O ne of the reoccurring issues public procurement needsthen abandoned.to deal with is cost overruns. As a result of the delays in the development of the Master Test Historically, government procurement has sufferedPlan and in the development of prototype M-6 vehicles, railcars a great deal from cost overruns, particularly those that havewere assembled, often with conditionally approved or without resulted from the failure of items ordered to perform inapproved engineering drawings.accordance with specifications when they are finally deliveredIn view of the manufacturers inability to produce prototype and installed. vehicles, it was necessary to accept M-6 railcars with significant These problems have been particularly pronounced in defenceconditions attached to that acceptance. Expensive and time-contracting and other areas of procurement where the itemsconsuming retrofits were required to correct the deficiencies.purchased tend to be at the cutting edge of technology. As the M-6 railcar program indicates, problems of this nature are particularly acute where an effort is being made to develop Here again are a few examples from the defence procurementa technology at the same time as production of the finished sector that are highly instructive: products is taking place.Some years ago, the United States Army bought 6,700 cargoWhile this is a particular problem in defence contracting, due trailers before testing them to determine whether theyto the need to produce advanced technology weapon systems, it could be hitched to the trucks that were intended to be usedhas surprising analogs at the municipal level, particularly in such with them. Tests ultimately revealed the trailers damagedareas as mass transit, highway construction and high-prestige the trucks. As a result, the trailers required extensivebuildingcontracts.modifications and were not usable for an extended period.It follows that although municipalities make limited purchases of The THADD missile was intended to offer the army anthis type, in comparison to more senior levels of government, theinterim capability to intercept enemy missiles. It waslessons learned at those levels should not be ignored.planned to be produced in just five years at a cost of $2.5 billion. When flight testing began, problems were found inThe causes of problems of the nature may be quickly summarized:the missiles propulsion system, launch performance and In an effort to keep the final price down, testing costs are booster separation, its computer software, seeker electronics,kept to a minimum. This is an obvious false economy, flight controls, electrical system and telemetry control. As abecause it will almost certainly be more expansive to result, the system took over eight years to develop and costredesign when testing reveals problems late in the design $4.2billion. process. If testing is not carried out until the item is in The optics of the Hubble Space Telescope were not fullyproduction, those items initially produced may have to be written off or extensively modified.tested until it was put into orbit. At that time, it was discovered the telescope functioned at a sub-optimal levelThe necessary testing requirements are not fully appreciated.for several years and required a very expensive in-spaceAs a practical matter, testing requirements increase greatly correction, including a dedicated space shuttle mission.where one purchases custom products, rather than mature, A civilian equivalent may be found in the developmentoff-the-shelf technology.and production of the M-6 Commuter Railcar for the Testing is often avoided by contractors due to concerns Metro Commuter Railroad and Connecticut Departmentabout the continued support for a project if initial tests ofTransportation. areunfavourable.8THE OFFICIAL PUBLICATION OF THE ACCESS ASSOCIATION OF CANADA'