"the government is completely incompetent and relies on the huge defense contractors for guidance"

This is the catch 22 of any business. If you don't know something, either you hire people with that knowledge or you contract it out. If you can't properly supervise the work/project/acquisition because you don't have enough depth of knowledge, then it's very hard to get a good solution. In the end, the government is at the mercy of private industry because the government can't be the best at everything.