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Biggest problem at NASA, contractors are paid a percentage of cost “We’ve got to change the way contracting is done,” Musk told the governors. “You can’t do th
by paulsutter 8y ago
Biggest problem at NASA, contractors are paid a percentage of cost
“We’ve got to change the way contracting is done,” Musk told the governors. “You can’t do these cost-plus, sole-source contracts because then the incentive structure is all messed up. As soon as you don’t have any competition, the sense of urgency goes away. And as soon as you make something a cost-plus contract, you’re incenting the contractor to maximize the cost of the program, because they get a percentage.”
From https://arstechnica.com/science/2017/07/elon-musk-knows-whats-ailing-nasa-costly-contracting/ https://arstechnica.com/science/2017/07/elon-musk-knows-what...
- yourapostasy 8y ago> ...are paid a percentage of cost Principal agent problem comes to bite us in the ass really hard in many industries where percentage of cost embedded somewhere within the incentive structure raises its head. Real estate, finance, insurance, the list of industries is long.
- nradov 8y agoNASA only uses cost-plus on a small fraction of contracts. It's sometimes unavoidable for high risk work; if they insisted on fixed price contracts then suppliers just wouldn't bid at all.
- deleted 8y ago[deleted]