A bureaucracy, by its very nature, tends to operate in a negative or passive mode. Bureaucrats rarely get credit when they do something useful or positive, but they damn well get the blame if something bad happens. The FDA is a shining example of this kind of behavior: the FDA is rarely accused of holding up useful drugs, but if a killer gets through the process...ouch.

NASA isn't quite in the same mode as the FDA. Mostly, the key to NASA behavior is that the bureaucrats get paid just as much for generating paper as they would if they actually built, flew, and maybe crashed something. There's no real incentive to lower costs if the possibility of failure increases, and there is a lot of incentive to use new technologies where they may not actually be needed.

This was really brought home to me when I found out that the forty-foot truss that was recently launched to the ISS cost almost $800 million dollars.

The World Trade Center cost about $400 million in 1972.

Now I know there's been some inflation since then, but cripes. A forty-foot truss, for God's sake. Does this seem a little nuts to anyone else?

You are totally correct on one point--bureaucrats are by no means limited to governments. There are many industries that are more than happy to study a problem to death, often in cooperation with a fat government contract. Many large aerospace companies fall into this category. The X-33 fiasco is the most recent example of this kind of behavior.

As for government prizes, I would, of course, prefer that such things be privately financed. On the other hand, if the government is going to spend the money on space anyway, a prize might be a good way to go about it. The idea would be to keep the prize and goal as simple as possible, and allow a maximum leeway as to how the goal is reached. This will allow more creativity in the responses.