The problem is that there’s an incentive to game the system, especially when there’s requirements that restrict how the government picks contract winners

If it’s fixed cost, they cut every corner to be picked, then deliver something shitty and the government either lives with it or awards a second contract to fix it. Sometimes they don’t even complete it - sometimes there’s a bail where you put up collateral meant to be used as punishment and so someone else can be paid to finish your failed contract, but with large companies there’s often so much proprietary shit/institutional knowledge that no one else could reasonably complete the contract without starting over… So they can fail a contract and still come back for more

If it’s cost plus, big contractors take a loss initially to basically buy revenue streams they can milk indefinitely. Sure, they can only make so much per head, but that’s money they know will be coming in so they’re incentivized to push the headcount on the project to the limit and keep the party going as long as possible

That’s the problem with rules, if you have clear boundaries corporations will inevitably exploit them. They are meant to fight corruption or bad/incompetent actors, but by codifying all of it they clearly divide what is illegal and what isn’t, setting it all up to be gamed