It’s absolutely a corruption issue, in that the government prefers to pay 2-3x what they would to solve things internally to contractors who then perform a poor job and lobby to keep whatever they build in place for decades.
Being serious, I wish I could find one of these 2-3x multiple payouts in government. Every time I've looked at anything government related (including direct contractors) the pay is garbage. Usually 15% to 50% of what the private market pays for my skill set.
Govt > contractor > sub-contractor > employee was pretty common. I never knew of anyone being a direct contractor to the agency since the contracts were so large and involved a lot of employees.
The actual employer can pay the employed contractor whatever they want, but the rates are published and if they underpay too much the employee will be poached by a competitor. Because the rates are public info the employee can look up how much profit their employer is making any time they want.
The old answer used to be for the government to hire directly, but that's been hamstrung for like 40 years by now.
(Also, OP is probably underestimating the full-sheet cost of a federal FTE, as well as the complexities of fund-based budgeting and forecasting.)
If you were the FAA and started up an internal startup to find only the best to replace systems that have been running forever you would face a lot of problems.
1. Nobody would give you the funding until something like what happened yesterday did
2. Your developers getting paid more than the FAA directors will get lots of political attention
3. Even a great internal engineering team would most likely take ages to do something like this. This isn't move fast and break stuff with a greenfield, it is painful deconstruction and analysis of a very complicated system.
4. Many people won't want to work on this no matter how much you are paying.
It is also out of the wheel house of an agency tasked with flight safety. So expensive contractors arise. Do they do a poor job often? Yes. But these are jobs that are really hard to scope and execute. If it is really a case of overpaid contractors coming in and not doing the work, people here should start a startup and hire a SEAL team six of 1970's computer system rip and replacers and make a lot of money.