The issue reported in the media is that there are few competitors.
That's a handy scapegoat excuse but it doesn't align with reality. Lack of competition only becomes an issue if a vendor is the sole supplier. However, most big acquisitions don't involve defence contractors coming up with a design on their own and then trying to sell it to the military. Much of the design work and advanced research is directly funded by the US Government through organizations like DARPA.
Take ATACMS as an example. It grew out of the existing Lance missile system but with a solid-propellant booster and a new ring laser gyro guidance system, both of which were funded by US Army Missile Command. In parallel, DARPA funded the Assault Breaker programme to explore how to destroy large number of tanks and fighting vehicles on the battlefield (this being the Cold War where NATO was vastly outnumbered by Warsaw Pact forces). These efforts eventually merged into the ATACMS programme. All that Government-funded work cannot be licenced or made proprietary, and hence there's no sole-supplier issue (although the winner of the research contract may well go on to win a sizeable proportion of the production contract).
Now, are there cases where companies can fluff up manufacturing costs? Absolutely. However, those costs are often driven by the volume of items ordered and the need to spin up/down tooling resources (which gets very expensive for low-volume production). Government purchase volumes are pretty small compared to the commercial world. Take the M1 Abrams of which just over 8,200 have been produced for the US military across 40 years. That's small beer compared to commercial car or truck production. Such low volumes have an inherent cost, I'm afraid...and adding on requirements for ruggedized/hardened technologies just brings more expense.
Yes, there are examples of exorbitant prices for some things; the infamous toilet seat on, I think, C-17s, springs to mind. However, those aren't a huge driver of cost increases. As others have already mentioned, the Government is notorious for adding requirements that massively increase costs, whether it's paperwork, audits, standards to be followed (down to grades of metal for even trivial components), specific inclusion/exclusion of subcontractors, and countless other things, not least of which is changing requirements (which happens A LOT).
We also need to consider the contracting mechanism. Is it firm fixed price, cost plus fixed fee, or one of the many other acquisition methodologies? FFP is an attempt to drive down costs, putting all the risk on the vendor to meet a price point. It's typically not popular because of the issues mentioned in the preceding paragraph. CPFF is more common but, IIRC, for US Government CPFF contracts, fee must be less than 15%. Even relatively large material costs increases don't increase the vendor's profit by much when compared to all the other cost drivers, particularly worker salaries.
The simple fact is that the bespoke technologies required for military uses ARE expensive and must meet different standards than commercial off-the-shelf items.
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www.thedrive.com
www.defencetoday.com
www.reuters.com
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