1. This does not happen in the private sector?
Last time I checked, in the private sector you can go to another company. Haven't heard of a competing "federal government service provider" yet. Can I get a different IRS? How's about a different FBI?
2. All civil servants are pretty much useless?
Not all of them, but many. WAY more than in the private sector, mostly because it's damn nigh impossible to fire them once they've hit their 3 year mark. About the only way to get rid of them is for them to commit a crime, then lie about it when caught. Committing a crime and coming clean about it won't lose them their job (well, depending on the crime...)