The problems with opening up big government contracts to multiple bidders is there is then a race to the bottom. However, outsourcing it one component at a time is definitely an interesting idea. Deliverables!
The presence of a race to the bottom on functionality is independent of whether or not the contract is open. If they don't have anyone competent who is vetting the proposals or evaluating the progress and deliverables, then they will wind up with shit no matter how they arrange the contracting. But if it's open to normal software shops, then at least they probably won't wind up with $200,000 shit.
Cheap yet sufficient is the desired outcome in government work.
I'm guessing 'sufficient' was defined too broadly or too specifically, and therefore was not correctly tested for on delivery.
Then again, just look at this app. How could it get any worse? lol
I know there are bidding procedures for everything to fight corruption but for little projects like this they should come up with a procedure to use odesk or similar services.
Then do it Scrum style.