Sorry, that's just not true. Most of the government's problems are created by the government and could be solved by the government if somehow a culture of accountability was created.
There's a lot of things that shouldn't be but are. As a government employee and later, manager, I should not have been stuck dealing with problem employees that, thanks to the HR policies, laziness, cowardice, and lack of integrity, were all but impossible to fire. I could spent a month documenting lousy performance only to see those who could terminate the employee do nothing done or move the employee to another position where they continued to be dead weight. (The hope being that the new manager of the loser would understand that trying to do anything was a waste of time and energy and not bother anyone about it.) The lousy employees had nothing to fear and knew it - no motivation to change. As a manager, I should have not have had to spend 25% to 30% of my day responding to taskers and data calls from various entities that never managed to contribute anything to the overall organization's mission than writing reports and preparing briefings that rarely served any purpose other than to justify the existence of the people who wrote them. Those are the self-licking ice cream cones I was talking about; they add no value and only get bigger barring outside intervention. If it sounds like no big deal, understand that the time I spent on that nonsense was time away from things like improving my program, addressing problems, and developing subordinates. Contractors had nothing to do with any of that.
There's a saying in government that is 100% true - never try to save the government money. I had a hard a time with that for what should be obvious reasons, and when I called it a career I was still struggling with it. Here's how is plays out - they put you in charge of a program and a budget. Being a person of integrity who is trying to be a good steward of resources, you try to get the job done at best value for the least dollars. (You treat the money they gave you like you treat your personal finances.) If you succeed in saving money, the result is the money you saved is taken away and given guy who blew his budget. Moving forward, you have a smaller budget and the guy who blew his has a bigger one. The rationale isn't that you did a great job managing resources, you just had been given more than you needed. If the money is moved outside the area your management controls, you will suffer negative consequences because you just "cost" them money. The lesson: spend all the money you can and don't worry about running out; we'll just ask for more. It will probably come from some poor schmuck who thought being cost sensitive and efficient was a good thing. That's the reality, and not one entity outside the government is causing that to happen.
Moving on to contractors, I will be the first to admit that there are plenty of scumbag contractors who will look for every chance to make a buck and will be happy to take more if you give them a chance. That said, there is no shortage of ways keep them under control. There are several different contracts types, but regardless of the type, the government has most of the power. The government does the market research, writes the SOW, writes the RFP, reviews the proposals, and awards the contracts. (The source selection process in the USG is actually pretty good, IMHO.) If the contractor has written unreasonable costs or given themselves large profit margins it should be pretty obvious the source selection team. (Few contractors are dumb enough to try it as it a sure way to not get the contract. If a contractor over charges the government on a FFP or even LOE contract, it's 100% the government's fault. The govie knows the reasonable costs, so how is it that the contractor can walk in with a proposal inconsistent with that knowledge and walk out with a contract? (If you go to a car dealer and pay $50K for a car you know is worth $20K you weren't fleeced, you're stupid.) On more complex acquisitions, the best approach is to put all the profit potential in award fees - money you pay the contractor for delivering what the contract says they have to deliver on schedule and on budget. So, while there are contractors who are darn good at working the system, the contracting officer and tech rep always can demand results and not pay the award fee if they the contractor doesn't meet the requirements. The problems come when the contractor doesn't deliver and the government still pays the award fee like they did. Is it really getting "fleeced" when you pay for something you knew you didn't get? I was part of a team that gave an underperforming contractor $0 award two eval periods running; I'm not sure if I should be proud of that because we were just doing the job we were paid to do. Sadly, despite the existence of other problem contracts, no one had ever heard of that happening before - other govies decided that it was easier to just given them the money they hadn't earned. If the contractor was stealing money so were the people who were collecting a USG salary for work they weren't doing and were accessories to the contractor's misconduct.
Obviously, there are aspects of this that are more complex than either of us has expressed. I'm agnostic on government vs contractor; I have seen both excellent and awful results from both. There are things the government should always do and things that should always be done by contractors. The key is always making sure that no matter who is doing what on the taxpayer dime that there is accountable for real performance and real results. If I could wave a magic wand and put that into the DNA of the government, most of the rest of the stuff would become minor details.