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Comment by yrb | Hacker News Reader

It is definitely a system issue. Our contractual/financial system just doesn't work well when confronted with large complex projects that have enough variance and unknown unknowns. Since they really push to have everything committed to up front, with really basic rules around how to handle change and variance.

Let alone that we basically award this work one estimated number and the ability to get through a paper work hurdle.

If you start making those rules complex it becomes hard to compare bids to each other, since your bids are likely to become non-transitive based on the scenarios.

Cost plus is the normal way this is side stepped, but unless you have a system that is mostly ethical actors that can break down. And if you have all ethical actors pretty much any system will work...

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Cost plus percentage gives a very clear incentive to raise costs; that's the only way you can get more profit. If it's so widespread that might be one reason why all our infrastructure is so much more expensive.

Why not just have major contractors required to post a bond when they place a bid, and if they have cost overruns they pull those from the bond (ie, their own money)?

> Cost plus percentage gives a very clear incentive to raise costs; that's the only way you can get more profit

Case in point: SpaceX challenging the launch industry's cost-plus culture with publicly-posted fixed prices [1].

[1] http://www.spacex.com/about/capabilities

Case in point #2: the new Bay Bridge.

Case in point #0: the Space Shuttle (STS).

Sorry, you're citing the Space Shuttle [1] as a successful public procurement process?

[1] https://www.nasa.gov/pdf/382045main_19%20-%2020090730.11.STS...

No, my cites relate to the parent comment:

  Cost plus percentage gives a very clear incentive to raise costs

Compare the original winning bid for the STS with the actual costs; I think they rose more than tenfold (and the per-flight cost rose more than that), IIRC.

And had the competing team won, the Challenger disaster never would have happened, because the solid-rocket boosters would have been manufactured as units and transported to the Cape by barge rather than having to be broken into small enough components to fit on rail cars.

Oh for sure, I should probably add a non-profit driven caveat to the actors in the system.

I am not sure if you can implement a system that would work well when your actors are profit driven work that needs to be done can only be done exclusively by one entity at a time, and as a bonus that extra profit gives you more feedback into how the system operates. There aren't a lot of natural negative feedback to keep things under control in that system.

Especially if your goals are to reduce overhead.

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