Don't you think that one can automate this process to the point where you hit ENTER on your screen, and out comes a finished passport? Who cares if the machine sits in Thailand or in Wisconsin? I can not imagine that the cost savings are huge, if you put this together correctly. And that's probably where the problem lies. They hand it to a contractor which will take the path of least resistance.
Aside from that, there should be a requirement that official documents can only be handled and printed in the US. I am sure they send the information over the web.
George