Because they, along with TLS, are almost a monopoly on the market. Plus, I assume, they offer good deals to government. Sorry for skepticism.
I completely agree with you, cheap is the way to go for most governments, but I expected better from the UK government, their own Gov.uk website is excellent.
Immigrants pay a lot of money for visa applications and they are expected to go through this torture and they cannot even complain to anyone about this.
I have been reading some of the reviews on VFS and some of the stories are terrible, peoples lives have been put on hold for a year or so (in case of student visa applications) because of issues at VFS.
I do sincerely hope that VFS provide better service and improve their work ethics.