Why the hell does everything the government do have to go through a contract and outsourced/ bid on?
Why don't they contract someone to come up with a better solution?
Why don't they contract someone to come up with a better solution?
Because:
1) There are lots of people ideologically motivated to minimize the "size of government" as measured by public payroll, and almost no one ideologically motivated in the opposite direction, and so contracting out helps to improve a metric that is important to a large number of stakeholders even if it is substantively meaningless, and
2) There's lots of money in firms that are specialized in taking government contracts, and they both lobby government and engage in public political advocacy effectively.
And, no, those two factors are not independent -- #2 contributes directly to #1.
(Also, outsourcing blame as adamnemecek points to in a sibling comment, can be a factor where the people who would potentially be at risk of blame actually have discretion of whether to do something internally or contract out, but that's often not the case.)
Also, most governments have made a feeble attempt to move toward a 'one size fits all' type of IT structure. This includes state run data centers, state-wide Active Directory structures, procurements services, buying from approved hardward and software vendors, yada, yada, yada. They didn't care that software from approved vendor A met 48% of my needs list whereas software from vendor B met 98% of my needs list at a fraction of the cost. Vendor A had been approved by procurement and vendor B hadn't. How are we to know your Cousin Billy doesn't own and run vendor B? How do we know you aren't receiving a kickback for buying from vendor B?
Which leads me to another ridiculous rule under State Government...I wasn't allowed to receive anything from a vendor (worth > $10) as a gift, if it wasn't also available to the general public. So say I am interested in buying a server for $4500 and I'm on the fence. The vendor wants to throw in 2 years of 7X24 technical support for 2 years if I buy the server from them. NOPE. If the general public can only buy the same server and get 5X8 for 1 year. I wasn't allowed to even (on the fly) negotiate a better deal.
EDIT: But not the initial comment about anti-corruption/anti-nepotism -- contracting out everything isn't a fix for nepotism/corruption -- indeed, statutory rules restricting contracting out (which, IME, state agencies are very good at working around when they aren't just ingoring them outright) are attempts to restrict nepotism/corruption. More often, the contracting out is because budget rules make it administratively simpler in practice, even if the theoretical conditions that should apply are harder, to contract out then to get additional state positions. (An example of how this can manifest is rules which require legislative action both to appropriate funds and to assign positions to an agency to perform that function, but where using appropriated funds to contract out doesn't require separate legislative action, even if it requires the agency to certify that the work cannot be done by workers in any civil service classification.)
But having said that, even with companies on price agreement, I wasn't allowed to take anything else that they might offer me if it wasn't also being given to the general population. A quick story: I received a really nice backpack from HP when I bought one of their very first "convertible" tablets (this would have been around 2008-09). When I purchased it, the site made no mention of the "extras" and I had to tell my boss that I received these without being aware that I was going to get them.
Unfortunately there are still a LOT of people in state government and elsewhere, whose eyes glaze over at the simple mention of IT. For them, it's a relief when you hear names like Oracle or IBM or Microsoft who win contracts. "Surely I've heard of Oracle. They're a big technology company and surely they'll know what they're doing". Relief ensues because NO REGULAR PEOPLE WANT THE BURDEN OF MANAGING AN IT PROJECT.