Is that really any different than any company's IT department figuring out what needs to get done and then, afterwards, deciding whether to insource or outsource the work?
If the "conflict of interest" biases taxpayers - awesome. Government procurement is supposed to be 100% bias towards helping taxpayers.
> more than a few contracts given to the golf buddies
When people talk about access to high-paying jobs and powerful positions being biased towards upper-middle class whites and Asians, this is usually what they mean (though not for the reasons you may presume). For most choices, there's a threshold above which the remaining choices are effectively equal. If you have a myriad of options that are all competent enough to do the job and in the same price range, how do you go about choosing one? At a certain point, the act making a choice and moving forward is more import than which one you chose.
There may be 10,000 shops qualified to create whatever it is you need. If you happen to know and trust one of them, and the price range is within budget, why bother investigating the other options? The time investment required would be huge, but the payoff wouldn't be very high.
Of course, overstating your needs and/or your budget to benefit someone you know is wrong - it's corruption. But, there's a very similar outcome that's a natural extension of human behavior. It's not detrimental to the parties involved, but may be to the diversity of society as a whole. All else being equal, of course you're going to choose someone you trust, and your friends are probably some of the people you trust most. Since you typically meet your friends while living your everyday life, they're probably people you have a lot in common with - people who had access to the same schools, jobs, and neighborhoods you did.
At first blush, if you need something done and there's a qualified friend who can help you, there's nothing wrong with that. However, after enough iterations of powerful people hiring their friends, we may end up with something resembling an aristocracy - a bunch of powerful friends always hiring each other, and another bunch of non-powerful people who can't get their feet-in-the-door.
If the "conflict of interest" biases taxpayers - awesome. Government procurement is supposed to be 100% bias towards helping taxpayers.