§ 4. Why Government Contracts Are Awarded to Friends and Relatives

We are all familiar with situations where a large company is serviced by a smaller one, headed by a friend or relative. Let's not discuss the moral aspect of this issue but rather its origins. The nature of such behavior by the decision-maker is quite simple and is based on trust. In custom development and large-scale production of anything, there are risks, including the risk of non-delivery. It is believed that if you have a recommendation or know the person, an invisible leverage over the contractor is created. This is because you know and trust this person. If you don't believe this, look at the audience of any "infopreneur" and how they warm up their audience.

The production of any product requires the efforts of many people who need to establish mutual understanding. Large deals are always about addressing pain points, which are often not very clear or structured. Moreover, there are many factors at play that need to be delicately navigated to avoid confusion and wasted effort. This is why it is said that business is built on trust.

Naturally, there is a downside to this in the form of wasted resources, as excessive trust can be exploited for personal gain. Of course, this does not apply to projects with teams of up to 20-25 people; such projects are quite manageable. But when the team exceeds 50 people, the scale of this issue changes significantly.

If we look at the history of custom development firms that have grown to more than 1,000 employees, we see that they inevitably put down roots in large companies because a credit of trust has been established. But the beginning for such companies is always the same—small projects that are needed to prove their competence and gradually integrate with the client.