Yeah, it's definitely a failure of project management. I'd like to point out that GOV.UK have greatly improved in this regard recently. Mostly by the old fashioned approach of having senior permanent staff who know what they're doing.

Contracting out at the top level (ie, including all the project management) is just a way to guarantee a money sink, because either you have a huge inflexible spec built into the contract or you have an area of vagueness where responsibility can be dodged.