@mysteryman,
"No bid" or, more properly in the government lexicon, "sole source" contracts are not and never have been illegal. Indeed they have long been a continuing feature of the procurement patterns of various government brueaucracies, particularly in the areas of social services and education. However, even the Defense and Energy departments use them in many cases as well.
The Federal Acquisition Regulations (FAR) spell out the conditions and circumstances under which sole source contracts are deemed by the government to be advantageous to it and therefore preferable. The choices in this area are made by the contracting officers and lawyers of the Federal Agencies involved. Many sole source procurements are themselves the results of earmarks attached to usually unrelated legislation by our ever vigilant congressmen and senators - earmarks that often specify not only what exactly the government shall buy, but also from whom.
Other apparent sole source or "no bid" contract awards come as a result of prior competitions for emergency service contracts that are activated only in the event of the specified emergency. That was the case with the Haliburton services contract in the Persian Gulf region. In fact the contract in question was awarded in a competitive process with other bidders participating. Apparently Haliburton proposed the best terms and was awarded the contract, which remained empty for several years before the Iraq war started.