It's agonizing to me that some of these government bids (my experience is in the US state of California) are required to take the lowest bid that meets the requirements unless they can clearly justify using a more expensive one. Of course, if they put out a general request they would end up with a terrible product, so they tailor their request to the company they want to hire.
Even then, the companies aren't really rewarded for doing a good job. They're rewarded for doing a minimal job that barely meets the requirements and using as much money as they can.
In my experience in the State of California -- mostly from the government side -- the rule is that there are, for each contract put to bid, rating factors and criteria established upfront and you must hire the contractor that scores the highest on those rating factors. That's not usually equivalent to taking the lowest bid.
That being said, this:
> Even then, the companies aren't really rewarded for doing a good job. They're rewarded for doing a minimal job that barely meets the requirements and using as much money as they can.
...is certainly an issue, especially, as is often the case, where reimbursement is based on hours and the contract amount is a limit, so that the incentive is to assure that as many hours are consumed as possible up to the limit.
Even then, the companies aren't really rewarded for doing a good job. They're rewarded for doing a minimal job that barely meets the requirements and using as much money as they can.