Why a federal high-tech start-up is a money loser
I don&#x27;t care if 18F makes money, and in some cases it may make sense for them not to.<p>In a perfect market, they would be able to sell their services at the same price as the value of those services. So if they build a system for the Veterans Administration (VA) that saves $1 million, they should get $1 million for it. Their EOY revenue would reflect their value created.<p>But they are actually selling to themselves. They are a part of the federal government, and their customers are other agencies. So the price they should charge is actually (value created - effort to get paid).<p>If they waste $500,000 of man-hours to get that $1m, then the government loses $500k for no reason, other than for 18F to be able to point to $1m in revenue as proof of services provided.<p>The government as a whole also loses out if price is an issue for the buyer, but a net win for the whole organization. If bureaucracy means that a department isn&#x27;t willing to spend $1m to reap $2m in savings, because maybe the benefits are nebulous or internal politics or any of the other crazy things that people do in big organizations, then it actually benefits the government as a whole for 18F to do it for free.<p>While I like that they focus on revenue to prove the impact they are having, selling products to other agencies shouldn&#x27;t be profit maximizing. Any inefficiencies, either to the buyer or seller, are taxing to the organization.<p>Side note: $32m is nothing. I&#x27;ll take that any day over people building GIF hosting and SnapChat.