The markup comes from two different sources. One is as you said. It’s to fund the black ops “doesn’t technically exist on paper, so we can’t have any funds publicly going towards it” types of things. People tend to complain a lot when the government “loses” money, so the government just hides their black expenditures in other more mundane things. Let’s say a bullet for a particular weapon only costs $1. The government marks it as $3, so they can then funnel $2 from every bullet into a black operation. Now the government doesn’t have to solve the problem of their books being unbalanced, because (at least on paper) money out=money spent.

The other reason is due to testing and ratings. Let’s say you need a new bolt for a tank. You can’t just go buy a $1 bolt from Home Depot, because the engineering spec requires that the bolt be able to tolerate a specific (high) amount of torque, shear force, shock (drop) force, static tension, etc… And Home Depot makes no guarantees that their bolts will be able to tolerate those forces. So the government hires a manufacturing contractor to do it. But then you run into scale issues. Because you can’t just buy a hundred bolts in a batch and let them sit on a shelf until they’re needed. People tend to complain about government waste when you do that, (and this bolt doesn’t usually need a lot of maintenance, so it isn’t replaced very often) so you’re only allowed to buy this bolt as needed.

You send the spec over to the manufacturer, who produces six bolts. One for sale, and five more for rating testing. There was also one trashed bolt, because it was out of spec (tolerances on the threads were too loose, by one or two thousands of an inch). Because they need to be able to put those bolts through various destructive tests to see when they fail. Because if you know when a bolt fails, you know what the spec is. So they test the bolts, ensuring it breaks above a certain weight, deforms/snaps (the head twists off or the threads strip) at a certain torque, the bolt cuts at a certain shear force, etc… All of these tests destroy the five testing bolts, but now the manufacturer knows when these specific bolts, from this specific batch of steel, will break. So they’re able to certify that this particular bolt will meet or exceed all of the listed requirements.

Congrats, you just purchased an $800 bolt. Because you’re not just paying for that one bolt. You’re also paying for all of the testing time. All of the materials and machinery needed to test the bolts. All of the fabricator’s hourly time to actually make and test the bolts. And the next time you need another one, it will cost another $800. Because the rating is only for that particular batch of steel. Steel varies pretty widely in quality, and the manufacturer can’t be sure that next month’s batch will have the same rating. So when you need another bolt next month, they have to repeat the tests all over again.