"Editor's note: There are several things getting mixed up in this story. EELVs are not the Pentagon's rockets. They were developed (partially) with DoD money so as to assure that the DoD had viable commercial launch options. But they have always been sold on a commercial basis..."
http://www.nasawatch.com/

The EELV were develop because the Military needed way to get military satellites into orbit.

NASA did similar sort of thing with the "The Space Launch Initiative", but they completely screwed it up by selecting VentureStar [which was suppose to be a shuttle replacement].

Of course the Space-X is the way a govt should actually get a rocket built. The company puts up the money to build and develop it and govt is willing to buy launches from it.
But the EELV program wasn't completely horrible. And at least it got rockets built and they fly fairly successfully- though not at their promised cost per lb- 1000 per lb

Of course we will see how well Space-X's Falcon 9 actually works fairly shortly.
Space-X's Falcon 9:
LEO Mass to Orbit (200 km circular): 12,500 kg (27,500 lb)
LEO missions: $36.75M
http://www.spacex.com/falcon9.php

36,750,000 divided by 27,500 is $1336 per lb

I don't know how much the EELV cost [nor does anyone] but there are at least twice Space-X's price per lb.

And apparently, Space-X is going to charge these rather modest prices to NASA [they under contract to do this].