OMG!! THIS is what Trump and Musk are up to!! (Forget the sensational distractions!)

[Bluetus]

108. That is quite common.

Big DoD contracts almost always have several phases. They may award a control to one or two bidders to develop the prototypes, with a defined set of deliverables. If the contractors don't meet the deliverables, they either renegotiate the contract, get an extension or drop out. But if they drop out, there may not be any penalty, other than not qualifying to go on to the second phase.

I'd expect any of these AI contracts to work that way. Lots of money for a demonstration phase, and then more contracts if the demo phase meet the goals.

The Boeing Starliner project is a little different. As I understand that one, the contract included commitments for Boeing to operate the shuttle service to and from the ISS. Boeing got a lot of money to develop the spacecraft, but never got into the main revenue phase, so Boeing took a big loss on that one. But you can be sure that, since Musk will essentially be contracting himself, the terms will be favorable.