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Comment by lakecresva | Hacker News Reader

Those things have legal remedies, the US legal system has just decided that the investor class should be absolved of any risk or liability. If you intentionally underbid to win a contract, you've committed fraud and are supposed to go to prison to disincentivize the next guy. If you are a contractor and are incapable of giving a good faith estimate of your costs, you're supposed to go out of business. If you cut a bunch of corners to stay under budget and do not render satisfactory performance, you're liable for breach of contract (and are supposed to go out of business).

The first two options have been removed from the toolbox of American government almost entirely.

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>If you intentionally underbid to win a contract, you've committed fraud and are supposed to go to prison to disincentivize the next guy.

How would you measure and enforce this?

It's not as hard as it might seem. If you are actually held to the contract and you have underbid, you either have a plan to continue the fraud (using substandard materials or illegal labor to save costs) or you will be forced to take a loss or go out of business. If your investors, employees (or their union), or client(s) are unhappy with that, and there is any evidence of intentionally underbidding to be found (and there generally will be, these are decisions made by teams. There are emails. There are notes) those people will have incentive to find it.

An investigation, and the legal system. Corporations exist because they make a deal with the state. In exchange for limited liability, they're required to respect the corporate form which entails things like meeting minutes, preservation of certain business records and communications, conducting audits, imposing oversight, etc. If they don't abide by these rules, plaintiffs can sue the company and bypass the limitation of liability to recover from individuals in their personal capacity.

This system of incentives and disincentives does work, and the US had a better handle on it in the past.

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