Falcon Heavy can do a lot of what SLS is supposed to do and Starship can do so much more, but that is beside the point.

NASA can and does award development contracts for things that don't exist yet. It works much better when NASA specifies the goals and only pays the contractor when they achieve milestones. This holds the contractor accountable for results. The other option is a cost-plus contract like the SLS program where the contractor gets paid more if they spend more. There is little incentive to actually deliver results.