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Interesting article. I have not read the book, or am very familiar with the construction of the Pentagon, but it is my understanding that military contractors in World War 2 were generally compensated using a Cost Plus model.

In other words, the company stated that a piece of equipment costs X dollars to produce, and the government compensated them with X + 0.10% (or whatever the actual number was). In this model, there was no such thing as a cost-overrun.

This is very different from our current system of competitive bidding before the project even starts. Our current system gives a strong incentive to make an unrealistic bid and then slowly roll out the real costs after it is too late to withdraw the bid without significant embarrassment.

Obviously, the WW2 model relies heavily on trust, but it seemed to work extremely well. My guess is that such a model would be very controversial, and perhaps unworkable, if used today.

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