If we set aside the EUV tech comparisons you were making, then sure, competitive awards make a ton of sense. The thing is, this is how many grant agencies usually work (unless they get some weird overrides from congress or the occasional failure of the competitive system (a.k.a. market failure?)).

> My proposal is simple. Put a $2B RFP out for a 9 arc second telescope if that is what is needed, perhaps 10 $1M proposal awards, down select to 3 $20M awards for further work, then down select to 1 or 2 $1B-$2B awards depending on where the bidding comes in. Payment as delivery is met.

This is actually how grant agencies like the NSF, NIH, DARPA, NASA, etc do it. Maybe not the exact parameters, money amounts, and specs you mentioned, but pretty much the exact overall process. Sure, "grant writing" expects a particular writing style depending on agency, and academic accolades are part of the (I would say reasonable) signaling of who is competent. But these proposals do indeed bubble up after competitions between many different teams, and nothing stops a startup or a hard-tech conglomerate in another field from putting in a proposal.