The incentive is to do the most work because being done early and under budget doesn't maximize $. Usually the market keeps these entities honest. Do shit work that's over budget and you lose business. But there is no market at play here, thus the govt needs to play the part of the market and penalize for this behavior but they do not. /Endrant
In Chinese/Soviet/1920s America equilibrium, with an insatiable demand for construction work, the profit maximizing behavior is to be done quickly in decent quality, then hop on to another project.
In the modern western equilibrium, where projects are few and far between, the profit maximizing behavior is to extract as much revenue as possible from any single project, employ lawyers, ask for extensions, attempt regulatory capture, create an opaque chain of subcontractors, etc. - as it's not clear whether there will be any new opportunity to do so in the future.
Zooming out a bit, this is why low growth is self-reinforcing. We need constant heavy demand to drive continual investment and productivity improvements.
I mean I'm pretty sure there is massive demand for affordable housing (especially in Manhattan!) but there's no incentive for developers to shift towards that vs bilking the everyone out of as much as possible for more "high end" construction.
The current system "works" for the people taking in the money, which they can then use to lobby the people giving the contracts to continue the current paradigm.
As with most things related to capitalist enterprises I think the solution is pulling people kicking and screaming from their beds and dragging them to the gallows during a revolution, but that feels unlikely...
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".
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.
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.