Comments by "Arthur Mosel" (@arthurmosel808) on "What Killed Zumwalt Destroyers?" video.

  1. The usual issue, as the units are canceled the per unit cost rises. Why? It costs X to develop the technology and Y to establish any special production facilities, and final Z which is the cost of producing special items for the design. The unit cost than is cost of X+Y+Z divided by the number of units added to the profit. As t he number of units purchase drop, the cost per unit rises. For argument sake let's say we are building something where development is 100,000 you chose a currency). It will cost 50,000 to modify the production facility; and another 50,000 to produce specialized equipment. I have left off the actual cost of production (man hours × pay per hour) lets say this is 100,000 per unit; and we say that the profit will be 10,000 per finished unit. Again for this case, we will use 50 units as the original target. This means that the unit would cost 200,000÷50 + 100,000 (actual production cost per unit)+ 10,000 ( profit per unit). When the math is said and done, will be 114,000. Now let's say we cut back the order to 25 units. Now the cost per finished unit will be 200,000÷25 + production cost + profit, or 118,000. Not a horrible increase so far, but remember if a new system is added, it could require a reworking of plans, cancelation of existing parts orders, and other cascading changes. Since I am keeping it simple (unlike what was done to the F-35 which has evolved into three different designs plus modification for air superiority ops for which it was never originally intended). Lets say the bean counters decide to reduce the production to 10 units. Now without changes, the cost of fixed expenses is 20,000 per unit, and a finished unit is now 130,000 or 26,000 more than the original costs; or an increase of a very little over 14%. Now the bean counters have a fit, and reduce the buy to three units too advanced to cancel and say we will now want the work completed over several years. We can now add inflation in materials and wage increases (again ignored for this example). The per unit cost of the fixed 200,000 expenses in the original development is now divided by three, making development costs now 66,700 per unit (I rounded it to the nearest hundred). This makes the unit cost, as completed, 176,700, or an increase of something over 61%. Now remember these ships cost much more than 100,000 to design, their building facilities cost more than 50,000 and the subcontractors probably had expenses and profit much higher than 50,000. I have no doubt inflation. In material and labor increased cost, and their armament was modified meaning design changes and delays, plus the profit was probably a percentage not a fixed amount. So drastic increases (overruns) aren't just the developers issue. From funding, design changes and work schedule changes; everyone in the purchasing system add costs. What was the real costs in dollars adjusted for inflation is never mentioned, just as design change costs are mentioned. It might anger the public at the Government, not just the contractors.
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