ABSTRACT
The stories are familiar. The $435 hammer, the $640 toilet seat, the $91 screw, the $2,917 wrench, and the $7,000 coffee pot. Oh, sometimes we get the amounts mixed up and say the $600 hammer and $2,000 toilet seat, but we all know these are outrageous examples of weapons acquisition contractor fraud and abuse that highlight the Department of Defense’s supposed managerial incompetence. What we usually do not know is the story behind the story, the bureaucratic explanations that should temper greatly the understandable comedic urges of late-night TV talk show hosts and the moral outrage of taxpayers contemplating their annual bill. Accounting rules that allocate overhead charges by transaction rather than in proportion to cost explain much of the apparently excessive charges.1 The rest can usually be explained by the complex requirements caused by military operations.
