Your experiences of the civil service / local government could hardly be different to mine! Although I will agree that many services within our particular council could not see the benefit of improving their IT services, and this did block innovative services from happening. Still, that's all about management buy-in (and other horrible phrases).
But I cannot agree that buying in consultants, or buying in an external Consulting Company, is the right way to go. If this relationship were to be medium to long term, then maybe (effectively, outsourcing). But where a consultancy is only contracted to provide a specific solution, all they do is meet the minimum spec (if you are lucky).
This is where "plundering the public sector" (an excellent book, by the way, written by David Craig, recommended reading) comes in, and equates to your "milk as much money". Whatever the reasons, the consultancy should be able to overcome "the BS" and implement the solution they were contracted to supply. If they cannot, then they shouldn't have taken the contract in the first place.
If the penalty clauses of the contract were better thought out, then maybe consultancies woudn't get away with as much. Or would make heartier efforts to complete the work they were contracted to do.
But then, workers in the public sector end up spending all their time writing specs and reviewing contracts, managing the consultants. Don't know about you, but I'd rather be solving the problem....