There are several problems with this; such an approach has been tried many times in the past. First, there is no way that a "fair" competition can be conducted. Overhead costs are apples and oranges - the government typically does not include the costs for the buildings, utilities, communications, the cost of retirement, etc. Second, such competitions typically discount the differing levels of expertise, simply asserting that government employees can do the job(s) without the proof or justifications required of contractors. Third, why is it the job of the government to compete with private industry? Where is that in the Constitution? "Providing for the common defense, does not mean competing (unfairly at that) with private industry."