4 ms·

But if it's completed late and over budget, your company won't get the bid in the future because of your soiled reputation as long as there are enough competito

But if it's completed late and over budget, your company won't get the bid in the future because of your soiled reputation as long as there are enough competitors. Hence the reference to markets.

belval 5y ago
In a perfect world maybe, in practice I doubt it. It's just not very human-like to take a lot of risk in large projects. If IBM takes a big project and delivers it late and over budget, they still delivered it so they will likely be picked for another project with the same low-bidding strategy.
- Joker_vD 5y ago
  And for projects internal to companies, there is usually no market or bidding (last time I heard of, anyway): here's the department's budget, go and deliver. You didn't manage to spend all of it? Next quarter, we're cutting your budget, and giving you a bigger project. Oh no, now you've overspent? Well, that's your fault really. As the proverbial wisdom goes, "to improve a dairy's profits you'd need the cows to give more milk and eat less food, so feed them less and milk more often".
- jcranmer 5y ago
  This is basically part of the thesis that Alon Levy is presenting here. Essentially, the reason for the high costs is that the government lacks the management ability to recognize that the bids coming in are unreasonably low-balled, combined with subsequent difficulties actually overseeing the construction process.
  - throwaway0a5e 5y ago
    Even if the government has the ability to properly manage the process it does not bring it to bear because both the government bureaucracy and the contractor benefit from the waste of resources. The larger the amount of taxpayer money that is being spent the more opportunity for a larger more powerful bureaucracy to oversee the spending and more opportunity for profit by the contractor. The same mutually beneficial waste exists at the contractor to labor unions interface (union drives up cost, more $$ for them, contractor passes on cost, more $$ for them) and at beureaucracy to politician and appointed administrator interface (bigger bureaucracy more resources go to it and more power for the administrating officials). The only loser in the whole deal is the taxpayer who has to pay more for less.
  - willyt 5y ago
    Typically it’s a rule introduced by naive politicians who say you have to take the lowest bid. In Britain this came top down from central government in the 1980s, previously it was more typical to take the bid closest to the average across of a minimum of three bids.
- somethingAlex 5y ago
  Exactly this. I was at a "company retreat" back when I was in IT consulting. It was mostly the top salespeople for that year so I, being on the delivery side of things, found myself in a strange world. After some drinking one of the salespeople started talking about a project that went 2 months past the deadline. I asked "...and they just paid for that extra time?" Everyone got all awkward as I realized that not only did they pay for that, they would continue to pay us to go over deadline. I was the naive one. It's just one of those topics you don't talk about.

But if it's completed late and over budget, your company won't get the bid in the future because of your soiled reputation as long as there are enough competitors. Hence the reference to markets.

belval 5y ago

In a perfect world maybe, in practice I doubt it. It's just not very human-like to take a lot of risk in large projects. If IBM takes a big project and delivers it late and over budget, they still delivered it so they will likely be picked for another project with the same low-bidding strategy.

Joker_vD 5y ago
And for projects internal to companies, there is usually no market or bidding (last time I heard of, anyway): here's the department's budget, go and deliver. You didn't manage to spend all of it? Next quarter, we're cutting your budget, and giving you a bigger project. Oh no, now you've overspent? Well, that's your fault really. As the proverbial wisdom goes, "to improve a dairy's profits you'd need the cows to give more milk and eat less food, so feed them less and milk more often".
jcranmer 5y ago
This is basically part of the thesis that Alon Levy is presenting here. Essentially, the reason for the high costs is that the government lacks the management ability to recognize that the bids coming in are unreasonably low-balled, combined with subsequent difficulties actually overseeing the construction process.
- throwaway0a5e 5y ago
  Even if the government has the ability to properly manage the process it does not bring it to bear because both the government bureaucracy and the contractor benefit from the waste of resources. The larger the amount of taxpayer money that is being spent the more opportunity for a larger more powerful bureaucracy to oversee the spending and more opportunity for profit by the contractor. The same mutually beneficial waste exists at the contractor to labor unions interface (union drives up cost, more $$ for them, contractor passes on cost, more $$ for them) and at beureaucracy to politician and appointed administrator interface (bigger bureaucracy more resources go to it and more power for the administrating officials). The only loser in the whole deal is the taxpayer who has to pay more for less.
- willyt 5y ago
  Typically it’s a rule introduced by naive politicians who say you have to take the lowest bid. In Britain this came top down from central government in the 1980s, previously it was more typical to take the bid closest to the average across of a minimum of three bids.
somethingAlex 5y ago
Exactly this. I was at a "company retreat" back when I was in IT consulting. It was mostly the top salespeople for that year so I, being on the delivery side of things, found myself in a strange world. After some drinking one of the salespeople started talking about a project that went 2 months past the deadline. I asked "...and they just paid for that extra time?" Everyone got all awkward as I realized that not only did they pay for that, they would continue to pay us to go over deadline. I was the naive one. It's just one of those topics you don't talk about.