The processes and hoops you have to jump through in order to respond to their requests for proposal are ridiculously complicated. Way too often companies who are not qualified get the contract merely because they knew how to play the system.
The government has programs to support small businesses like 8a for disadvantaged, one for businesses owned by disabled Vets, one for women owned. This does help some, but more often than not those companies are just paid so that bigger companies can bid for work and use them as the vehicle to get it. In my experience as a government contractor for most of my career I've seen countless scenarios of companies bidding for 8 resources on a task but really only using 2. I've seen them work on contracts for over a decade, and despite horrible execution of the project they continue to win the re-compete because they'll purposely squirrel away anyone who can help a new contract winner. They'll eat the cost and give people useless jobs at their corporate offices just to attempt to make the new contracting company fail.
There is also a terrible history of nepotism involved. The entire system is abused. Officers have even set up companies and awarded contracts to themselves right before retirement. When they leave they have a ready made contracting company complete with an ongoing contract and perhaps one or two for their past performance record already. By the time they're caught, they are fined a million or so which at that point is small price to pay for them. They just had the world's best interest free business startup loan. Yes, I have first-hand knowledge of one such instance of this and I know it is definitely not an isolated incident.
Here is an example of waste: When I was on one of my last contracts I spent months doing nothing of real consequence. Through some weird situation I was left with no project manager and no tasks. I informed all of the management who would listen, and requested work. I began to worry I'd be cut, along with the worry that if I sat idle my hard-earned skills would dull. I found another job and quit. I received a call from the vice president of the company telling me she was hearing what a great job I was doing and that they wanted to offer me a substantial raise to stay. It was then I realized they didn't care what I did. They could bill for me. By showing up I was doing a "good job". I couldn't take it and left.