Thanks
@Red Leg for the compliment but I’ve never worked with depreciation of defense weapons systems. I don’t think short of demilitarization or Defense Logistics Agency’s Defense Reutilization, it is even possible to depreciate weapons systems, be they tanks, fighters, of specialized laptops. For over 20 of the past 40 years working in and for DoD in procurement, sustainment, and demilitarization of weapons systems, spare parts, and ammunition to include explosives, I’ve never been advised by DoD contracting that a system was worth any less than it’s in production procurement cost. Further, I can’t find anything in the Federal Acquisition Regulation (FAR) about depreciating weapons systems. There probably is for common items like fleets of commercial automobiles and office equipment but I’ve a weapons guy.
Please remember there are Public Laws passed by the US Congress, along with DoD regulations that govern how weapons systems from specially configured laptops to F-35 fighters are developed, procured, trained, operated, sustained, and eventually put in storage or sent to be demilitarized. Some of the older equipment is sold to friendly foreign nations via Foreign Military Sales (FMS). Other times with Presidential and/or Congressional authorization, such as presently is occurring in Ukraine, our military equipment is provided for friendly nations to train on and/or use to defend themselves.
Let’s consider an Abrams tank. I pulled this off the Internet so it may not be exact but it’s close enough for this analogy. “The cost of an M1 Abrams tank varies, with the M1A1 model estimated at around $4.3 million, while the more advanced M1A2 SEPv3 can cost approximately $24 million.”
A base Abrams M1A1 when in production for a lot of say 500+ units cost $4.3 million each. Chances are that cost is double or more today.
A current M1A2 SEPv3 costs $24 million each for a lot of approximately 500. That is if those tanks were to be built from scratch. Probably not because with a few thousand M1A1’s sitting in the desert, some of those will be the base of the new SEPv3’s. Their $4.3M procurement cost each is just the base price of the new SEPv3’s.
This is why DoD doesn’t depreciate a weapons system. When the main production line throttles back to 5% of full rate production, each unit produced is probably twice the cost of the larger initial contract price. The 5% production is maintained to keep the line open. Because when the production line is gone, it is nearly impossible to resume production for anything than another full rate production. Production lines have specialized equipment that when gone, must be procured again.
Here’s another aspect, old weapons systems form the base of current requirements of upgraded versions capable of the necessary offensive capabilities and defensive survivability. Otherwise with the production line in a skeleton state, where would we acquire a few hundred Abrams for upgrading. So, each old Abrams sitting in the desert is worth at least what we paid for it.
If the USA pulls a few hundred M1A1 Abrams out of desert storage at $4.3M each and restores/rebuilds them to full operational capability at a cost of $1M each, the net cost is $5.3M each. But let’s not have a cow because the cash outlay was $1M each, not $5.3M. Plus, that $1M each is for USA labor and components and parts, mostly made here!
What if we continue this to demilitarization rather than rebuilding or reutilization? Those Abrams have components and parts in them with demil codes restricting them to very secure or hazardous material restricted destruction. Each special demil of a component costs money, our tax dollars! First however, those parts must be removed from each tank, cleaned, catalogued, and then shipped to the probably unfunded demil facility. Once again, John Q. Public tax payer pays for that. Demilitarizing an Abrams probably costs about the same as an upgrade and shipment to Ukraine.
Remember the components and piece parts that have environmentally restricted materials? Those are very expensive to demilitarize. Only a few places can accommodate them and it is expensive to do so. These environmentally restricted materials are found in many different types of military ammunition. That’s the stuff that goes “bomb” when it hits the target. Talk about a waste of our tax dollars! It would probably be cheaper overall to just shoot it off but that would be illegal. Illegal? Yes, there are laws against this for demil. But, if our allies need ammo and we have old ammo that would over wise be on the demil list due to exceeding their shelf life, it is legal for the USA to ship it to our allies who will shoot at our mutual enemies.
The bottom line is probably half to ¾ of the value of the military aid authorized by the President and Congress is accounted for in old weapons systems and aging ammunition. All of that would eventually cost you and I tax dollars to demilitarize.
What
@Red Leg states time and time again is accurate, very accurate. Further, for those who from time to time demean him because he is a Major General in a retired duty status, or post service had a career as a business executive, grow up. This forum includes a lot of high powered people balanced by common Joe’s and everyone in between.
What
@Red Leg states about aid to Ukraine is accurate. Heck he commanded the DoD Security Assistance Office (probably not the correct designation). That’s the bureaucratic entity that processes all the defense equipment going to places like Ukraine.
For those that wonder who the heck I am, I am a former USMC Gunnery Sergeant, Chief Warrant Officer-3, who retired as a Limited Duty Officer (LDO, very specialized and like Trump, "Loud, Dumb, and Obnoxious" ) Captain. I followed my service with a career assisting DoD in weapons systems management. Be advised, no one hates arrogant, uppity unrestricted (“regular”) officers more than someone with my service background. Having met our resident General Officer and looked him in the eyeballs, he’s good to go!