Its an incredibly complex ever evolving situation.
Basically, originally Starship has entered development for SpaceX had nothing todo with any of this. SpaceX started to spend on Starship for their own reasons.
Then in Trump 1, he simply inveded a super agressive 'get to the moon' goal. 'Moon 2024'. This was mostly a fantasy goal but it sounded good politically. NASA for various reasons, had aboslutly no money to fund a moon lander. But if the president asked, they have to do it. So they threw out very opened ended ask for a moon lander, and a single moon landing.
There wasn't the kind of question asked like, what kind of system should we use for moon exploration in the next 2 decades. Or anything like that. It was more like 'how can we land on the moon once in 2024 and then we do new contracts after that'.
SpaceX, naturally justed adopted their existing Starship platform. But to make that work, they would need to figure out many things beyond just a 'lander'. And SpaceX bid was wildly to ambitious. It in many cases provided far, far more then NASA asked for. But NASA doesn't care about the capability, only if the bid can do the minium they asked for.
SpaceX won because they were willing to pay for almost all of it themselves, only asking for 2.3 billion $. And that included a test moon landing before the real one.
This is of course only a fraction of the cost for the whole Starship program.
So Space didn't spread themselves to thin, they are all in on Starship, but the simple reality is, its an incredibly difficult wide reaching program. And the moon lander part is just a little add on to that larger project. And that's the only reason 2.3 billion $ would be acceptable to SpaceX.
The simple reality is, nobody on the planet knows how to do a moon lander for 2.3 billion $, literally nobody.
So the time table way always fantasy and literally everybody knew that as soon as it was announced. Nobody was to public about it because offending Trump is bad, so lets all just collectivly pretend its real.
The government contract was unfocused and short term focused, without a larger strategy for moon exploration.
The real issue however isn't with this one contract, but the how the whole NASA Human Spaceflight program is organized.