This is an absurd argument trotted out by people who -- to be blunt -- have absolutely no idea what really goes on.
Lawsuits by government agencies against suppliers are rare, and likely to result in a loss if attempted against large corporations. Companies like Microsoft or Oracle have armies of the best lawyers on retainer. Government agencies can only afford the ones that have sensible shoes and patches on their jacket elbows.
A recent case in point: The NSW Transport department had a legal spat with a huge contracting company Acciona, and ended up losing the court case to the tune of over half a billion dollars!
That specific case made me laugh out loud because the company I worked for had signed a very similar contract with the same department. I remember looking at it and thinking it was some sort of joke that nobody in their right mind would sign (on the government side). It included none of the "hard but essential" bits, and all of the easy fluffy bits. They signed it. They argued with us over non-delivery. We pointed at the contract and made them pay us 5x more than the original amount to do the actual, hard work.
The real reason that government agencies like big contractors is because they are reassuringly expensive. They're the "big name" that looks good in reports. They're chosen by people with unlimited funding, no profit motive, and the power to choose a vendor with the sole motivation of covering their ass. That's it. No need to be "efficient", or "fit for purpose", or any such thing.
These decisions are all made by a small number of people acting in individual self-interest. Optimising for their own continued employment. They're trading your taxes so that in the event of a failure they can point at the name on the report memo and say: "See! Not even Big Name Vendor could implement this! It's not my fault!"
I once got "fired" from a consulting gigs where things went wrong and I took it very hard. A salesman explained that our purpose is to be easily fire-able so that the manager at the customer can keep his job. That's why he paid us triple rates compared to a direct contractor. I was back on that site 12 months later, once everybody forgot who I was.
TL;DR: Organisations that mis-allocate punishment and reward force their internal middle-managers to protect themselves at the expense of the organisation. Big consulting firms exist to milk these inefficient organisations, and this has nothing to do with lawsuits.