It was already a small private company doing the contract. Another bigger company (that was publicly traded and therefore operating with shareholder profit as the primary if only concern) came along and bought the smaller private company. This happens to start-ups all the time.

What does this have to do with "government's bloated and inefficient bureaucracy"? The only government failure I see in this story is that they allowed the sale of the small company to the big one, or that they allowed the big company to get out of the contract.