They can but that has several widespread problems: the biggest is that you need skilled people in the government who can review bids and oversee work – otherwise you get a $10M contact form because someone at BigCo1 wanted to play buzzword bingo and keep their buddies employed, and the “overseer” from BigCo2 wasn’t going to saying the team, often former coworkers, wasn’t performing well because that’d invite honest grading on other contracts where the relations are reversed.

Beyond that, you get various efficiency issues: contractor turnover tends to be higher, which is terrible when institutional memory matters or when you’re relying on their best people to keep a larger group productive, and there are often various contractual or policy issues making work less efficient. One challenge is that managing contracts is a lot of work, so there’s a temptation to go with the big companies who offer many services but that often means that they’re only good at one area and you get mediocre results in the other ones which were lumped into the same contract - often banking on the difficulty of taking corrective action meaning that people will accept low performance in non-core areas to avoid jeopardizing a core project by the same company. None of that’s intractable but it adds up and fixing it is hard.