Research oriented government agencies already sometimes give grants to private organizations (corporations, typically) for largish chunks of work—climate tech startups get nontrivial amounts of project funding from organizations like NRECA for example. Do these grants work better than grants to PIs? That seems worth finding out. Similar, though less research oriented, is the phenomenon of “Beltway bandit” companies whose revenue comes mostly from defense contracts—I suspect that for better or worse, the incentive structure faced by grant seeking labs in your proposed model would come to resemble these.
Research oriented government agencies already sometimes give grants to private organizations (corporations, typically) for largish chunks of work—climate tech startups get nontrivial amounts of project funding from organizations like NRECA for example. Do these grants work better than grants to PIs? That seems worth finding out. Similar, though less research oriented, is the phenomenon of “Beltway bandit” companies whose revenue comes mostly from defense contracts—I suspect that for better or worse, the incentive structure faced by grant seeking labs in your proposed model would come to resemble these.