As somebody with a public sector background, I might be able to shed a little bit of light on some high-cost public procurements. Sorry for the long post, but it's relevant to almost anything that you see the public sector buying, and you wonder why they spent so much money on it......
Structural Costs:
1) If you have to buy a lot of something (eg. $25K+), you need to put it out to tender. (reasons: proving that you're spending the public's money wisely, ensuring other companies have an opportunity to get public contracts).
2) You have to carefully specify exactly what you want, otherwise you'll get something that can't do what you need. This makes the procurement complex; bidders will have to guess at what the public agency's true intentions are, and might over-spec their solution. Similarly, the public agency might want all the bells and whistles, and therefore will write excess requirements into the spec.
3) The bidders expend a great time of time and money to put together their bids; depending on the complexity of a given procurement, it could cost tens or hundreds of thousands of dollars just to prepare a bid package. There is an aspect of rent-seeking behaviour here-- if a bidder wins on average one in three bids, their proposal will probably build in 3x the bid preparation cost.
4) So if you are a local police agency seeking 40 or 50 camera systems, it's entirely possible that there's $1,000 per system built into the bid cost, just for doing the bid proposals.
Equipment/Labour Costs:
5) Public agency generally expects the private sector to take on a lot of risks, and those costs get built into the cost of the units. Maybe they want a 5-year warranty, with 24-hour replacements. The cost of inventory and replacement of bad units gets built into the unit cost.
6) Maintenance and Service: this can often be built into the cost of the units. Federal money's probably paying for the purchase, so may as well find a way to have the Feds pay for maintenance.
6) Public agency generally wants a stable company, so that they can be assured of their existence 4.5 years down the road. Stable companies tend to have healthy profit margins.
7) Software, software, software: the cost of developing the software and having a system that will work with other systems at the public agency is built into a small number of units. This is also one of the risks that a bidder builds into their price-- maybe the software integration will be easy, maybe not. So bid it based on the difficult scenario; if it's easy, you walk away with more profits in the end. If it's hard, at least you've covered your costs, and the public agency will be happy with the work you did, and will be a good reference to win further public sector bids.
8) Hardware: since the bidder has to support it for 5 years, they'll choose "proven" parts and suppliers-- forget about anything cutting-edge, unless you're willing to pay through the nose for it. Keep in mind that the hardware being produced in 5 years still has to be compatible with the hardware installed on day 1. You'll pay for this convenience.
9) Training: you'll have to train people at the public agency to operate/maintain these systems, and this costs money.
10) Remember that this isn't something useful to the general public, so your engineering costs can't be amortized over a large number of units-- and there's a lot of customization for this particular public agency that has to be amortized over this small order of camera systems.
Examples of customization that isn't particularly useful for the general public: access control (to videos), auditing (it knows who's seen any given video, who's modified it, who's deleted it, etc.), longer-term recording (my company records for 2-3 days; others might want weeks or months of recording), video storage and backup systems, connection to remote computers for automated backup, or for automated retrieval of desired footage.......
So at the end of all this, you'll have a camera system built on old technology, which you can count on to run for 5 years, but at 10x the cost of something simpler. And you did it this way in order to prove that you're spending the taxpayers' money wisely. Seems crazy, but it seems to help prevent corruption.
And from my perspective in my regular employment: if I can convince the funding authority that we need a particular system, they will approve it, with relatively little question of the costs that I budgeted, and I will successfully deliver the project. If instead I try to get a cheap solution that might not quite work, or might have significant drawbacks, but at a much lower cost, the risk of the project's failure is higher. If I fail to successfully deliver a project, I'll have difficulty getting funding for other projects in the future, and it may forever tarnish my record. Better to play it safe!
Always remember: "the bitterness of poor quality remains long after the sweetness of low price is forgotten"
