Here's an idea, probably 0% Chance of being done. Not entirely original, but...

Split NASA in Two. Bring back NACA, only this time it's National Advisory Committee for Aerospace. Pure R&D, they can build x-vehicles but not production systems. Have a simple licensing system for anything developed with two provisions 1: Patents go for one term, no renewals allowed, and 2: No exclusive licensing (None!).

Then keep around one called NASA (Would be a shame to have to scrape the logos off of everything), only now it stands for National Aerospace Services Administration. Allow them to keep doing things such as putting up orbiting telescopes, but require that any developement work they may want done has to either be put in as a request to NACA or other outside sources. (They can put together a committee to ask 'What do we want in a second generation space telescope', but they don't build or design it, they pass on a Request for Proposals 'Must have four times the light gathering capacity as Hubble, be able to image deep into the UV and IR spectrum, and should be capable of full time communications with the ground at a rate of at least 1 megabit per second, with the capability of increasing to a higher rate by simply changing a hot-swappable module -- five designs will be given stage one funding to present us with blueprints, up to three *designs* will be purchased and bids then requested for construction'. -- No more, "Hmm, Hubble's getting old, lets put a few dozen people to work and ask them to turn over a design sometime before they retire).

Perhaps also give the new NACA a portion of its budget to spend on a Bounty program where they could go out to industry and universities and say, "We would like a widget with qualities X, Y, and Q. Up to five persons or groups can receive a bounty of $500,000 each and x% of royalty payments for turning over a design and applicable patents to NACA." Changing 'widget' to heat shield material capable of resisting up to X degrees for thirty minutes and a tensile strength of Y; or, solid rocket fuel producing X isp when ignited in this manner in a chamber of Y dimensions; or, space suit for daily wear on long duration missions, should have tear resistant outer skin, be capable of being donned in under 60 seconds, and not mass more than ten kilograms in total not including a life support pack with may not add more than 25 kilo's of mass - oh, and with unisex plumbing.

But whatever's done, even keeping it one agency, get some separation between the R&D and actual operations people. Its great to have them talking to each other but as LJ described below this constant tweaking, for no better reason than tweaking, has got to stop if we want to see anything approaching a consistent life within or near budgets and time schedules.