Three contractors are bidding to fix a broken fenceat the White House. One is from Chicago, another is from Tennessee, and the third is from Minnesota. All three go with a White House official to examine the fence.
The Minnesota contractor takes out a tape measure and does some measuring, then works some figures with a pencil. "Well," he says, "I figure the job will run about $900: $400 for materials, $400 for my crew and $100 profit for me."
The Tennessee contractor also does some measuring and figuring, then says, "I can do this job for $700: $300 for materials, $300 for my crew and $100 profit for me."
The Chicago contractor doesn't measure or figure, but leans over to the White House official and whispers, "$2,700." The official, incredulous, says, "You didn't even measure like the other guys! How did you come up with such a high figure?"
The Chicago contractor whispers back, "$1000 for me, $1000 for you, and we hire the guy from Tennessee to fix the fence." "Done!" replies the government official.
And that, my friends, is the economics of government projects.
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