This is what we get for so many idiots voting for "small government," pro-privatization candidates who support outsourcing government projects to private contractors. :/ Unfortunately its become ubiquitous among candidates on 'both' sides (yes, I vote for third party candidates but the vast majority of Americans ignore them and even scoff at those of us who vote for the candidate we think best suits us instead of limiting ourselves to 'lesser of two evils'), and the results are the same ad infinitum -- contractor executives get wealthy, rarely are they held accountable for shoddiness in implementation or exceeding the contract price they promised in the bidding process they could keep, and they always look for whatever corners they can cut to lower their actual costs so they can remain the low bidder and still funnel gargantuan amounts of taxpayer dollars to their hands.
"Private" (corporate) entities are interested in one thing: concentrating wealth in the hands of their executives and already wealthiest shareholders. Any claims to the contrary (things like 'customer-focused,' 'quality-focused' or the like) are meaningless, unsubstantive sales pitches. If they were truly customer-, product- or service-focused above their own pay, they would not give themselves a year-over-year raise percentage several times that of their actual production or quality control folk, nor pay their production or quality control folk less than their sales folk. Placing the greatest monetary focus on salesmen more means squeezing more out of the quality they have instead of focusing on better quality products or services. This is a small part of the reason why "privatization" diverges from the best interests of the nation and even the economy as a whole. This has proven to be the case over and over, especially since the U.S. moved from being largely agrarian to industrialist-capitalistic starting around the mid to late 19th century. Hard lessons were learned early about the tyranny of unchecked capitalistic power, but over time this has become a lost lesson.
Of course, the vast majority of the time contracts come in on time and on or under budget. But don't let this catastrophe pass without somehow using it to bash the very people who fought tooth and nail against this particular disaster. No ax to grind there at all, huh?
Take it from someone who spent a decade working on both sides of this problem, the US government doesn't function without contractors. There is no scenario where the government is capable of doing everything it needs to do (however you define what it "needs" to do) without contractors. Our military can't operate. Nevermind the production of war materials, our military can't fight without contractors on the ground side-by-side with soldiers. The State Department can't carry out its mission. Energy, Education, HHS, the 3 letter agencies. None of them are functional without contractors.
Modern technology is simply too complicated for the government to maintain everything in house at the resource levels it needs exactly where it needs them when it needs them. The flex up and down would make it impossible to retain talent without paying exorbitant salaries.
As for your second paragraph...every contract I ever saw, on either side of the process, was Cost-Plus-Incentive where both the award fee and the incentives were tied to performance metrics and cost saving targets both set by the government. The key is to align the incentives with what benefits to government project and to have good project management on the government side. In the case of Obamacare they likely had neither and they were unwilling to delay the project to give it time to recover (for entirely political reasons). But the failure of one high profile project doesn't call the effectiveness of contracting in general into question.
