All Musk is saying is that they bid the project as a Firm Fixed Price (FFP) contract. Most contractors aren't willing to do that with untried technologies b/c of the possibilities of cost overruns. For instance when the government buys Humvees for the army they pay a Firm fixed amount per vehicle because the contractor knows exactly how much one should cost and charges more than that to the government.
For a brand new stealth fighter though, there are a lot of unknowns and a lot of development to do before they can build the first plane. The contractor can say "We think we can do all the necessary research for this with 100 people over 3 years plus $2 billion in additional costs for materials and to contract out the construction of new factories etc. All that added up would be $5 billion (plus $100 million per additional month beyond 3 years) and we expect a 15% return in profit on this development." This is called a Cost plus Fixed Fee contract. If they were to bid it as a firm fixed price contract they would just say "we want $3 billion per plane for the rest of time" and the government would likely overpay comparatively. The government agrees to the cost plus fixed fee terms because the know it allows the contractors to price their offering lower if they don't have to take on the risk.
So option 1: Government takes on risk of overruns but pays a lower price if on time and on budget.
Option 2: Contractor takes on the risk and makes out like a bandit if they are on time and on budget.
Firm Fixed Price is what the EADS did with the A400M. When governments kicked in, dictating engine suppliers, changing specs to fit all militaries involved...
well let's just say it did go well. Lesson to be learned: If you are in full ontrol of everything from scratch to delivery and have clear costumer specs you can do that.
If you are a quasi state-run business with political obligations serving multiple customers with different requirements, you better don't.
For a brand new stealth fighter though, there are a lot of unknowns and a lot of development to do before they can build the first plane. The contractor can say "We think we can do all the necessary research for this with 100 people over 3 years plus $2 billion in additional costs for materials and to contract out the construction of new factories etc. All that added up would be $5 billion (plus $100 million per additional month beyond 3 years) and we expect a 15% return in profit on this development." This is called a Cost plus Fixed Fee contract. If they were to bid it as a firm fixed price contract they would just say "we want $3 billion per plane for the rest of time" and the government would likely overpay comparatively. The government agrees to the cost plus fixed fee terms because the know it allows the contractors to price their offering lower if they don't have to take on the risk.
So option 1: Government takes on risk of overruns but pays a lower price if on time and on budget. Option 2: Contractor takes on the risk and makes out like a bandit if they are on time and on budget.