I wouldn't doubt that this often occurs, which makes it even worse to enforce that local firms must be awarded contracts.  It is far more likely that the Ontario government will have some cozy, backroom deal with an underperforming Ontario firm than with a New York (or California, or wherever) firm.

While opening up the bidding process to a wider audience isn't going to eliminate governments giving special deals to their friends, it will hopefully at least be a small part in improving the transparency of the whole process.