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Comment by bumby | Hacker News Reader

The government has lots of employees who came from the private sector and know exactly how that side of the house works. They aren't really this disjointed set of workers.

IMO, a lot of the differences come from the different set of rules that govt work has to run by. For example, Aldi can just decide to hire a contractor that they know does good work at a reasonable price. In contrast, the govt has to use a lengthy fair and open bid process and if they want to select a bid that isn't the lowest, it's a painstaking process to justify that selection. Govt work must adhere to certain laws that tend to push up labor wages (see: Davis Bacon Act). Plus, the govt has lots of other competing goals, like supporting minority or veteran-owned business etc. A simple comparison misses all of those nuances.

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> For example, Aldi can just decide to hire a contractor that they know does good work at a reasonable price. In contrast, the govt has to use a lengthy fair and open bid process and if they want to select a bid that isn't the lowest, it's a painstaking process to justify that selection.

It's unfortunate, but probably better than the corruption that anything else will enable in the long run. Churchill said that democracy is the worst form of government, except for all the others. For government spending, lowest bidder is the worst form of contracts, except for all the others.

I think the point that gets lost when you see comments like the GP is that they are operating under different sets of constraints because they are trying to optimize for different things.

FWIW, the govt can do "best value" contracts instead of lowest bid. But there is an asymmetry in risk to those making the selection. If something goes wrong in the design/construction, or if corruption is found, there's a lot more explaining to do. Like the old quote, "Nobody got fired for hiring IBM," except in this case "Nobody got fired for selecting the lowest bid."

> In contrast, the govt has to use a lengthy fair and open bid process and if they want to select a bid that isn't the lowest, it's a painstaking process to justify that selection.

Isn't that a recipe for cost over-runs?

I mean, it sounds like if building a tunnel costs $100M and one company bids $100M (planning to deliver on budget), a second company bids $50M (planning 100% cost overruns) and a third company bids $25M (planning on 300% cost overruns) it's mandatory to select the third company?

Within reason, yes. Engineers will still evaluate the proposals and if there’s a huge discrepancy like you described, they can be thrown out. But often part of the game seems to be first underbid (within reason) to get the contract and then make up the difference on change orders to be profitable.

Yes. Unfortunately it's still the law.

It's absurd really. Massive pressure to pick the cheapest bid, then very slowly discover that the cheapest option can't actually do a reasonable job in a reasonable timeframe, then some years later try again with the same cheapest must win premise. It's kind of optimising for cost but poorly and with no feedback loop.

There is a feedback loop. Under a firm fixed price contract, the vendor has to eat any cost overruns. Contacts can include bonuses for finishing ahead of schedule, or penalties for being late. And there are administrative procedures for barring vendors who fail to deliver as promised from bidding on future contracts.

There are second order effects on those, though. Fixed price contracts incentivize contractors to cut corners to make up for cost overruns or to pad their profits (doubly so if it’s a contractor who underbid to win the contract). Unless you’re willing to pay for a lot of govt oversight, many of those won’t be noticed until the contract is long complete. Even if noticed, you need an organization willing to engage in that legal fight.

The administrative controls are lagging indicators at best, and administrative controls are usually one of the least preferable control mechanisms.

> Plus, the govt has lots of other competing goals, like supporting minority or veteran-owned business etc.

Do governments actually award contracts based on race?

They must award based on many factors, including race, gender, and veteran status for a portion of contracts.

https://selectgcr.com/blog/minority-owned-businesses-how-to-...

And yes, it causes massive corruption.

Not exactly true. They typically have a goal to award a certain percentage for those programs. It’s not as if every contract is graded by that criteria.

But yes, it can open the door to corruption and inflated costs. For example, a tiny veteran owned corporation may be hired who subcontracts to a massive firm instead of the other way around. The govt would probably be better off just contacting to the large firm directly.

Edit: Sorry, I misread your comment. You are correct.

I fixed it before seeing your comment but shortly after posting, so we probably passed in flight. Likely not your problem!

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