Yeah, I'm going through the same process right now with a similar product and DoD customer. What happens these days is that they send out an RFQ to half a dozen different "approved suppliers," which is government-speak for "People who have jumped through the necessary hoops to drop-ship stuff to the Federal government from the basement in their house."
Whichever "supplier" marks up the product the least -- a product they will never see, much less stock -- will presumably be the one who wins the right to pass along the order to me. This is the government's idea of competitive bidding.
It's just nuts. The waste, overhead, red tape, and opportunities for corruption are just totally batshit nuts. But what can you do...