We were told explicitly that this was because council needed someone big enough to sue. To this day it makes no sense to me. But that’s how it was.
Whether the reason was made to justify the existence of some parasites doesn't change the fact that it's a real reason. A company that's been in business for over a century isn't going to go out in a year, and worst case someone will have the knowledge and certs to keep the ship running.
I have personally seen one of the big consultants change entire project methodologies twice - at the customer’s expense - within 6 months, in the same project.
This is leaning more into the big business revolving door problem - but in any case, I don’t think it’s widely accepted that the big consultants reduce project risks in any meaningful way.
And quite frankly, if your strategy is to sue a company if things go pear shaped, why in gods name would you choose IBM as your partner?
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.
Acquainted with a few pretty terminations for cause, some of which put resellers out of business.
Of course lawsuits against suppliers are rare, because conflicts between suppliers and clients are resolved through contract law. When I was managing customers' servers we had specific SLAs and service metrics that if not attended to resulted in the supplier reimbursing the customer by a _nice_ amount. A Sev1 incident on mainframes that was attended to later than expected could cost tens of thousands to the supplier.
You point to government agencies, but you forget that the consumers of these services are also large Fortune500 companies with very explicit profit motives, cost-saving policies, and relatively effective IT departments. Large companies are as leery as governments of small suppliers for the same reasons. Is the argument valid considering that there are very competent organizations that hold the same reservations?
Lehman Brothers was around for 158 years and it imploded in much less than a year.