When NASA astronauts Butch Wilmore and Suni Williams splashed down off the Florida coast last week in a SpaceX Dragon capsule, it wasn’t just the end of their unexpectedly long 286-day trip to outer space or another early win for the Trump administration. It was a reminder of how infusing more legitimate competition into the government contracting process can yield exponentially better results.

Wilmore and Williams embarked on a mission to the International Space Station (ISS) aboard Boeing’s Starliner spacecraft in June 2024, with an intended duration of just over a week. However, due to significant technical malfunctions—including thruster failures and helium leaks—the Starliner was deemed unsafe for their return journey.

Consequently, the astronauts were forced to extend their stay on the ISS for an unprecedented nine months while awaiting an alternative means of transportation back to Earth. According to Elon Musk, who founded SpaceX, the Biden administration refused to work with the company to return the astronauts owing to Musk’s endorsement of President Donald Trump.

Boeing’s Starliner program has been plagued by repeated delays, technical failures, and massive cost overruns, with expenditures surpassing $2 billion. These issues not only jeopardized the safety of the astronauts but also undermined confidence in Boeing’s capacity to fulfill its commitments under NASA’s Commercial Crew Program (CCP).

The contrast between Boeing and SpaceX’s performance under CCP offers a compelling case study in government contracting reform. CCP, in part, aims to develop commercially built and operated crew transportation systems to safely transport NASA astronauts to the ISS by leveraging bids among competing aerospace contractors to advance America’s space ambitions, including returning to the Moon and landing astronauts on Mars.

NASA took an unusual approach to CCP – fixed-price contracts instead of traditional cost-plus arrangements. Boeing received $4.2 billion while SpaceX got $2.6 billion for the program.

In a cost-plus contract, the government reimburses a contractor for all allowed expenses plus an additional profit margin, effectively removing financial risk for the contractor. A fixed-price contract requires the contractor to complete the project for a predetermined amount, placing the financial burden of overruns and inefficiencies directly on the company.

In cost-plus contracts, companies can manufacture complexity and inflate costs, knowing they will be fully reimbursed plus guaranteed profit. Fixed-cost contracting forces companies to internalize risks and efficiencies, transforming government contracts from a guaranteed revenue stream into a competitive marketplace.

In short, cost-plus contracts incentivize runaway spending, while fixed-price contracts reward efficiency and results.

Fixed-price contracts aren’t just a procurement strategy; they’re a market correction tool. By creating genuine financial consequences for underperformance, NASA can effectively use capitalism to ward off bureaucratic inefficiency. SpaceX’s success puts Darwinian pressure on Boeing – innovate and deliver or lose future contracts.

CCP’s fixed-price structure means Boeing doesn’t get paid for failure. Unlike traditional cost-plus contracts that guarantee payment regardless of performance, these new contracts force real accountability. Through its ability to adapt quickly and operate within budget, SpaceX has set a new standard that Boeing must either meet or risk becoming irrelevant in the aerospace industry.

Fixed-price contracts have fundamentally transformed NASA’s procurement strategy. Unlike traditional cost-plus models, these contracts mean Boeing and SpaceX must absorb their own development losses.

Government bureaucracies are inherently inefficient, lacking the economic incentives that drive innovation. Boeing had long operated under cost-plus contracts that subsidized their inefficiencies, while SpaceX built its entire business model around efficiency.

Former NASA Administrator Bill Nelson articulated the CCP program’s fixed-cost philosophy to Congress in 2022: “I believe that that is the plan that can bring us all the value of competition. You get it done with that competitive spirit. You get it done cheaper, and that allows us to move away from what has been a plague on us in the past, which is a cost-plus contract, and move to a fixed contractual price.”

The results speak for themselves. While Boeing struggles with delays and cost overruns, SpaceX has completed nine successful crewed launches. Even more telling is the fact that SpaceX delivers astronauts to space for $70 million per seat, while Boeing’s Starliner costs taxpayers $90 million per seat.

Particularly as the newly established Department of Government Efficiency (DOGE) begins its sweeping review of federal contracts, the SpaceX-Boeing comparison provides a clear example of how contract structure can drive efficiency and save taxpayers significant sums.

The implications for government contracting reform are significant and extend far beyond spaceflight. Recent analysis from the Government Accountability Office shows that federal agencies spent over $700 billion on contracts in fiscal year 2023, with a significant portion under cost-plus arrangements. According to federal contracting data, these cost-plus contracts have led to major cost overruns and inefficiencies.

When companies bear the risk of their cost overruns, they tend to find ways to deliver, as SpaceX has, or, like Boeing, they are forced to face the consequences of their failure and internalize their losses instead of stringing along taxpayers with extended budgets and deadlines.

This approach aligns perfectly with core conservative principles of fiscal responsibility. The SpaceX model demonstrates how private sector innovation can replace bureaucratic inefficiency with free-market profit incentives that yield more results for each taxpayer dollar spent.

For Wilmore and Williams, safely back on Earth after their extended stay in space, the theoretical debates over contract structure translated into very real consequences. Their rescue, executed flawlessly by SpaceX, stands as a testament to what’s possible when government contracting prioritizes results over process, efficiency over bureaucracy, and innovation over institutional inertia.

Sarah Katherine Sisk is a senior at Hillsdale College pursuing a degree in Economics and Journalism. You can follow her on X @SKSisk76.