Jeremy Corbyn has called for an end to the "costly racket" of outsourcing public services as he clashed with Theresa May over Carillion's collapse.
The Labour leader told MPs that the failed firm and other private sector suppliers offered poor value for money and should be "shown the door".
Financial warnings were ignored to try to keep Carillion "afloat", he claimed.
The PM said government was a "customer not a manager" and had put safeguards in place to protect public contracts.
Work on construction sites run by Carillion, whose collapse on Monday has put thousands of jobs at risk, is to pause while decisions are made over their future, the Insolvency Service announced earlier on Wednesday.
But work on most of Carillion's private sector service contracts, such as catering and cleaning, is to carry on until new suppliers can be found.
The issue dominated Prime Minister's Questions, with Mr Corbyn accusing Theresa May and other ministers of "negligence" by continuing to award Carillion contracts in the second half of 2017 despite the firm issuing a series of profit warnings.
Carillion, he suggested, was symbolic of a failed model of outsourcing which rewarded a handful of companies and their directors for poor levels of service and left the taxpayer to pick up the tab for failure.
"This isn't one isolated case of government negligence and corporate failure - it's a broken system."
"Under this government, Virgin and Stagecoach can spectacularly mismanage the East Coast Main Line and be let off a £2bn payment.
"Capita and Atos can continue to wreck the lives through damaging disability assessments of many people with disabilities and win more government-funded contracts.
"G4S promised to provide security at the Olympics - failed to do so and the Army had to step in and save the day. These corporations need to be shown the door - we need our public services provided by public employees with a public service ethos and a strong public oversight.
"As the ruins of Carillion lie around her, will the prime minister act to end this costly racket of the relationship between government and some of these companies?"
But Mrs May insisted that full oversight was maintained of the firm's public sector business over the summer and the taxpayer was not having to bail out the firm after it went into liquidation.
"We were a customer of Carillion, not the manager of Carillion, and that is a very important difference," she told MPs.
"We're making sure in this case that public services continue to be provided, that workers in those public services are supported and taxpayers are protected."
A third of Carillion's public sector contracts were signed off by the last Labour government, she pointed out, while its most recent customers included the Labour-run government in Wales and Labour-run Leeds Council.
But she said a Corbyn-led government, which has pledged to renegotiate all existing PFI contracts with the goal of nationalising many of them, would starve the public sector of all outside investment.
"What Labour oppose isn't just a role for private companies in public services. It's the private sector as a whole," Mrs May argued.
Amid calls for bonuses paid to Carillion executives to be clawed back, the PM said the Insolvency Service was fast-tracking an investigation into the collapse of the firm and the conduct of its current and former directors.