NASA Hoping To Create Super X-Prizes

Rei writes "NASA is attempting to use a strategy of handing out contracts as prizes, akin to the Ansari X-Prize, instead of the contractor-preferred method of bidding and having payment before work is completed. They are hoping to have prizes worth as much as one billion dollars. The only hitch? Congress won't let them."

Comments

Re:no way

[gilroy]

Wow. I've been reading slashdot for a long time now but rarely have I seen a poster get it so entirely wrong.

For one, who is to say they won't overpay for something?
OK, we'll leave aside the economic tautology that the proper price of something is what someone's willing to pay for it. Let's just look at this important fact: Until the project produces, no money changes hands. This contrasts with the current system, when NASA makes a wishlist, a corporation purports to fulfill it, and then everyone walks away with the cash whether or not the project actually comes to fruition. At least in the new model, no money is "wasted" until there is an actual product.

But wait. What if NASA says "Space Probe Frobozz is worth $10M to us" but company X can build space probe Frobozz for only $3M? Aren't we "wasting" $7M? No. NASA paid what it thought was reasonable. Company X made $7M -- which is a good incentive to get into the business. If you only pay companies for the cost of materials, they're not gonna line up to service your mission. The idea here is to tap the very powerful profit motive (perhaps you've heard of it?) so eminently a part of the American experience.

Also, if the prize isn't large enough, some of the major players capable of making things happen might stay away form competing because of not having enough money to compete or because the return on investment is too low.

Let's leave aside that this completely subverts your first argument. Are you saying that "major players" will be scared away by a return on investment that is too low, so we should pad it? Obviously, companies will want to make a healthy profit; if NASA sets the prize too low for space probe Frobozz, then no one will step up to make it. The solution of course would be to then raise the prize money. At some point, one of two things will happen: (a) The prize gets high enough to entice companies to compete for it or (b) The price gets high enough to exceed NASA's estimate of the value of space probe Frobozz, so the contest never yields Frobozz. Either of these are valid and proper economic outcomes. You want Frobozz so bad? Cough up for it.

Now ask yourself, If you was [sic] the CEO of a large publicaly traded company, how many times would your investor/board of directors let you compete in good faith[?]

Well, if I were the CEO of a large publicly-traded company, I would hope I understand basic economics, including the fact that risk underlies all economic activity. I'd know that competing in good faith is about all my company does, every day, and is something to be neither feared nor ashamed of.

When after spending X amount of money to acomplish goals X and Z, your bigest competitor beats you to the punch and your out X amount of dollars and little hope of recycleing the research that went into it.

Again, that's how it goes, except of course it hardly ever goes that way. Your biggest competitor seems to have stolen a march on you, but then, that means you're not economically viable. But most likely the research you've done will be "recyclable", because you've learned a lot about whatever was being pursued. Ah, competition continues, to the good of the American public. If the odds were high that your competitor would beat you, you'd probably not invest the effort. But it's that element of risk that makes the market work.

The X-prize worked for what it was intended for because that was the sum of money to make it attractive for other buisinesses to get into the market and that money wasn't competing with any other projects.

I suggest that you take an economics class and learn the concept of "opportunity cost". There is never a time when money spent on one thing has no other