I have, unfortunately, seen this behavior and outcome with many types of government contracts, not just cost-plus. One of the worst had the contractor so deeply embedded in a program office the IG got involved as they were receiving incentive payments despite failing to meet contract requirements (despite several government people losing their positions, the contract was not lost even though fraud had almost certainly occurred).

There are certainly some contractors who aren't as deep into the grifting, and a small handful who really are sincere, earnest, and successful, but they're a rare breed. The big contractors (Raytheon, LM, NG, Boeing) keep eating up the little ones, and the outcome is about what you'd expect from these conglomerates.