Is this really much different than outsourced projects for huge corporations? Seems like large organizations get charged a premium for the same amount of work.
Government can hire technical people who can do the work in house, or who are qualified to evaluate the work. But because of the pressure to keep government small, qualified tech people go to the private sector and overcharge the government. Seems like one can't win here.
Its also worth pointing out that sometimes, just sometimes, it works out the other way. I was the lead on a team that took $150k in funding and produced an open-source implementation of some CDC specifications (https://github.com/talho/openphin), and became the first software in the country to be certified with it. We developed it in about 12 weeks, and the first milestone certifications were actually complete-able (meaning we had the features, though the paperwork took longer) within 2 weeks. We were up against companies used in other states like Northrup and SAIC that literally spent millions on the implementations (and don't even get me started on how much those same companies spent coming up with the standards in the first place, which is a whole 'nother problem) and beat them handily at their own game.
We did use private contractors as additional assets starting out and while they were more expensive than hiring additional developers, they had two great attributes: temporary, and good at what they did. Its worth it to pay for competence, every single time. And when its a one-time expense for a project, its much, much easier to deal with than something that incurs year-over-year expenditures.
Government can hire technical people who can do the work in house, or who are qualified to evaluate the work. But because of the pressure to keep government small, qualified tech people go to the private sector and overcharge the government. Seems like one can't win here.