Without overstating the obvious, in the last two years an increasing number of companies are introducing components and products with extremely high levels of integration. Systems on a chip (SOC) have advanced to such high degrees that instead of having the standard external logic and passive control circuits, these components are internal to the integrated circuits. This yields two very important benefits. The more integration into a single chip package, the less real estate and fewer components are required at the printed circuit card level.
Generally speaking, the smaller the component count, the higher the overall reliability as there are fewer single points of failure with less exposure to the ambient environment. Encapsulating a circuit in a potting type of compound can further achieve higher reliability and ruggedness against shock and vibration stresses.
Think of a crowbar that you can buy from any hardware store. It is a single article, comprised of iron that has been tempered at high temperatures to increase its strength. Now ask yourself how often you have seen a crowbar fail? If you wanted to further reduce the incidence of a crowbar failure during a leveraging operation, you would keep a spare crowbar handy. In reliability speak, this is called redundancy, and it is a significant design mandate for high reliability applications.
At the component and system level, parts and products are categorized into three main reliability classes. Most common to everyday consumer applications is a rating called "Commercial." The component's or product's reliability is guaranteed to continue to operate between zero and 70 degrees centigrade. 22°C to 26°C is considered to be a comfortable room temperature range, so while 70°C seems very hot with 60°C on an IC package burning your fingertips, industrial and military ranges on the high end can go up to as high as 155°C with a cold tolerance down around -55°C.
Other parts used in specialty applications can operate at lower temperatures and move to even higher extremes. Without moving into a technical paper here, I wanted to present the relationships between temperature ratings and reliability. That is to say that the broader and the higher the temperature range, the more reliable the component or system. Also, the cost to produce and screen the component goes up, and consequently this increase is reflected in the wholesale or retail price.
In a report issued by the Department of Defense titled "Excess Inventory and Contract Pricing Problems Jeopardize the Army Contract with Boeing to Support the Corpus Christi Army Depot," Boeing, a regular supplier of military grade products, was found to have gouged the DoD beyond belief. The Army paid significantly higher prices to Boeing than if it would have procured the same parts from DLA. For example, DLA 2009 Unit Price: $12.51; Boeing 2009 Unit Price: $644.75. Boeing Refunded: $556,006. And, DLA 2009 Unit Price: $7.71; Boeing 2009 Unit Price: $1,678.61. Boeing Refunded: $76,849.
Here's a quote from the report:
AMCOM officials did not effectively negotiate prices for 18 of 24 high-dollar parts reviewed because neither AMCOM officials nor Boeing officials performed adequate cost or price analyses, and Boeing officials submitted cost or pricing data that were not current, complete, and accurate (7 parts). We calculated that Boeing charged the Army about $13 million or 131.5 percent more ($23 million versus $10 million) than fair and reasonable prices for the 18 parts.
I could make that argument that Boeing may have performed extra screening or special inventory management that would have upped the cost, but these parts were identical out of the box. The Defense Logistics Agency was buying the exact same parts manufactured and tested to the same reliability levels.
I also could not help but notice that this data was using the 2009 pricing from the DLA. The US went into economic meltdown in 2008. So, Mr. and Mrs. Taxpayer, as the report concluded, Boeing was able to rip us off via military expenditures because the purchasing people did not do their jobs correctly. As the report also mentions, the purchasing people were buying replacement inventory even though there was excess inventory on the shelves. To quote from the report once again:
The Army is procuring parts from Boeing instead of using $242.8 million to $277.8 million of excess DoD inventory to satisfy CCAD requirements.
We started this article talking about reliability. Reliability starts with reliable people. No matter how you cut it, you will be paying more for industrial and military grade components, but if the military is spending this kind of money without real-time checks and balances, I tend to think that there is not enough reliable cost oversight, and if we want to stretch that American dollar, we should think about creating a watchdog group to keep an eye out on companies like Boeing that, according to the same report, only had to pay back less that 10 percent of the excessive charges to the Army.
Now, if I was not entirely ethical and a shrewd business guy, I would be encouraged to continue my price gouging activities as I would still yield 90 percent of my original gouge. Words fail me to express how wrong this is when people are out of work everywhere and our military spending is off the charts. Our $700 billion dollar bailout was justified in part by having to help companies that were too big to fail. Apparently we also have military contractors too big to sanction. That bodes ill for any kind of permanent resolution to these pricing practices.