This is true, sort of. According to the National Center for Education Statistics, state and local funding accounts for approximately 93 percent of education expenditures. When you are procuring any object or service with State money, there is tons and tons of red tape. The process is laborious and can take a really long time to bid out a simple job. The idea is that you are fair and competitive, not just giving the work to a buddy.

On top of that, during the bid process, there are certain incentives given to businesses who can prove they are a small business, that they are a disabled veteran or that they are eligible for any other type of incentive program. That gives the vendors claiming preference an edge above the competition (sometimes this can be up to a 20% advantage).

So lets say you're a vendor and you claim all sorts of incentives which net you a 20% advantage. You can bid $100 on a contract that someone else (who isn't claiming incentives) bid $81 for and you would win it BUT still get paid $100.

That's a very basic understanding of procurement at a government agency. It gets more complicated because there are many forms. To bid, you should be a registered vendor, there's a form for that. Then you need to make sure you fill out maybe 4-5 other forms that come with that. For a service, like building a school, you have to make sure your subcontractors aren't also submitting a separate bid that can look like collusion and that they are performing a "Commercially Useful Function" under your bid so it doesn't look like you picked them up solely to gain some sort of incentive.

Because of all of this, it's a bitch to win a bid with a state agency. Purchasers tend to stick with the businesses they know and businesses that know the script to avoid any issues. The same few major players will keep winning bids because of this. They have the process down and when they win the bid they do the bare minimum amount of work they can get away with according to the statement of work. If the State employee forgot to line out, "Bidder must clean up after installation" the bidder is not obligated to clean up after themselves, and often they wont.

These are usually the same businesses that build prisons.

TL;DR It's a bitch to win a state bid for a job. The same few businesses end up winning because they know the legal loopholes to win. They do the bare minimum once they have won the bid.