North East - can't really give you a solid answer on that but let's look at a couple of things . . .
When the Civil War broke out (sorry Hawg, I'll rephrase that - "the late unpleasantness"
), both sides were put in a position of having to arm their troops . . . and as a result, both sides looked to European countries to buy arms to take up the slack. I would imagine that Colt had the ability to produce the arms and probably had the Govt. "over the barrel" a little . . plus, as you have said, things were no different back then as they are now . . favoritism, lobbying, kickbacks, etc. I'm not faulting Colt in any way . . . profit is not a dirty word. Look at it another way as well . . . the armies need arms . . . Colt could produce them but what would have happened if they said "no"? They were a private company and in no way would any private company turn their backs on lucrative contracts.
If you haven't seen the movie "Lincoln" . . . you should. It's basically the story of him getting the 13th Amendment passed. I've studied Civil War history of 50 years and I found it very interesting . . . especially the "politics" - kind of reminds you of Washington today . . . but we won't go there.
In a relateed story . . . my great grandfather came to the US in 1847. He bacame "naturalized" in 1850 along with my great-great-grandfather who came over with the rest of the family after my g-grandfather had purchased land, etc. I have papers of my g-grandfather - farmland leases, etc. that are in the Civil War years. In Ireland, they were flax growers and weavers - here they were farmers. During the Civil War, he leased as much farmland as he could - as close as I can figure, probably around 350 acres - a lot at that time, especially for horse drawn equipment. He had six kids at that time of working age and he hired additional labor . . . to raise beans which were much needed by the army. He became a wealthy man for those times . . due to the opportunity that the war provided for the government needing beans.
I guess it's human nature to take advantage of circumstances when you can . . . my great grandfather certainly did and I'm sure Colt, as well as many, many contractors did the same. It hasn't changed one bit and probably never will. We hae an Air Force but probably they are very limited in "passenger planes" so to speak . . . as a result, private companies are making a fortune from the Govt. in flying troops around the Mid-East . . . I'm no expert, but I have to believe that the Govt. could buy passenger planes several times over and the Air Force fly 'em . . . but somehow, politics gets involved?