Yep, that's the case alright. But let me first say that across the board, there are some true believers who love working for NASA because it's NASA, and are every bit as good as people in the business world. They just choose to stay with us because they're passionate about helping make space exploration happen. Thank goodness for those people! I'm fortunate to be able to work with many such folks and I give thanks for them daily.
But basically this is true for any field in which it's possible to make a lot of money in the private sector, and it's not just NASA that suffers, but all government. We just can't compete in terms of compensation. Most of those who are good enough to go make a killing in the private sector do exactly that. Legal, financial, and IT are probably the most glaring examples.
On financial stuff, it's a combination of budget analysis (pretty good) and procurement activities (pretty abysmal).
On legal, I just am not conversant enough with that field to be a very accurate judge, but the areas we've had to interact have very often resulted in needless roadblocks being thrown in the way of progress owing to overly picayune interpretations of rules and guidelines.
All of this is compounded by the basic structure of government bureaucracy. When I go on travel, for example, by the time my "travel orders" are fully approved and executed, somewhere between 15 and 20 people have had to sign off on it. That is just stupid.
All of this lends itself to folks who are happy to be, shall we say, not very proactive. It's very frustrating when it takes two months to execute a purchase that should take no more than two hours to do.