PN, quite right.
This is the nub of the problem with contractorisation in this form; if there is no credible option to bring the "service" back in-house, then the MoD will simply have to pay whatever the market demands. The double-bugger of this is, of course, that you'd have to decide well in advance that you wanted to have the people and expertise avaliable in-house for this to be a realistic option - you've otherwise got to rely on transfering the existing staff into the MoD as civilians (possible, but expensive) or getting them all to join up (effectively impossible, even if it were desirable).
Given that FSTA is a 20+ year contract, it's less of an issue here, but the general point is right. Which leads to an interesting series of questions about MFTS....
S41