> Significantly more arbitrary middlemen making their way into the process because of "let the market figure it out"
does, in fact, create some process inefficiencies in supply chains and contract pipelines. Few countries are as aggressively market-based for things meant for public good as the US.
It's kind of disingenuous to blame "let the market figure it out" for government contracting problems that are attributable almost entirely to political corruption.
Governments buy a million things from the private sector using contract bidding with reasonable requirements, and then the low bidding napkin vendor turns out to be Walmart or some direct napkin producer in the midwest, the state spends 0% of its overall budget on napkins, and nobody pays any attention to the successful process because it's 0% of the overall budget and there is nothing to complain about.
The problem is that it's all too easy for a corrupt politician to purposely add a contract requirement that only a specific contractor can satisfy, with the predictable consequences for the level of competitive bidding and the contract price. But that's not fundamentally any different than politicians pandering to government workers unions by "creating jobs" supervising people who are digging holes and filling them back in, even if they're all direct government employees.
The people receiving the money have a much larger incentive to spend their influence on that specific project than the average taxpayer, because it constitutes 100% of their income rather than 0.5% of their tax dollars, only then there are a hundred such projects and it looks like half the budget is waste (because it is).
The problem is probably made worse by the separation between revenue and spending. We have one institution in charge of generating money (tax collector) and then a hundred separate ones in charge of spending it, but the spenders aren't accountable for the money and there is a lot of buffer because the government as a whole can just spend more than it collects and issue debt to make up the rest of it. Which means there is nobody really in charge of making sure the taxpayer is getting good value for money in any given project.
What we could do is to elect the heads of the various government departments (e.g. transportation, education, law enforcement) and have them pull revenue from the same source (e.g. sales or income tax), but the tax rate is set directly based on how much money they actually spend. In other words, they set their own individual budgets, but they also have to individually directly answer to taxpayers. But the general legislature still has to approve the overall budget to keep any of them from getting out of hand.
Then if the head of transportation doubles the transportation budget to spend it on corruption and waste, leading directly to a 2% increase in the sales tax (and doesn't get vetoed by the general legislature), he's out on his butt in two years, and is more likely to actually end up in jail because now more people are paying attention.