I think a major part of the reason is that most Dept's like mine go to vendors or importers to test and purchase dogs. The vendor offers a good selection, hopefully at least 6 - 10 dogs when we go to test. The PD sends out a "RFQ" or "Request for Quote" or an "RFP" to several vendors and decides on vendors based on responses. Each PD is a little different, but the common things are some health and workability guarantees and competitive pricing. Once the vendor list is set, we go and test dogs. Now, I know of one vendor that takes dogs from individuals in the US, mainly Malinois, and offers them for sale to the PD's and Military. Mostly, these are sport rejects (IPO, Ring or PSA) and too hard to handle or have serious aggression issues. I could tell you some really good stories. I have cut this vendor from our selection process; even though he is located in my city and we will travel 4 hours one way to avoid using him. I think most larger PD's avoid local breeders because of the bidding, RFQ and selection process. You have to have dogs available when the customer needs one, guarantee the dog and participate in the selection process.
I know of some excellent breeders of GSD's in the US that still produce dogs capable for Police work, unfortunately they are spread out across the country. It wouldn't be feasible for me to go out and test one dog that was more than a few hours away. I do see a bias leaning away from the GSD in some Dept's. I have been told recently y a PD with over 20 Patrol dogs that I train with that they will never use GSD's again. This is based on the wash out rate, health issues and workability. I think most LEO's are like myself and simply pick the best dog available at the time of testing. I'm sure the vendors see the trend and want to offer a decent product at a competitive price and that is where the Malinois has gained ground.
I am going to be raising a "Boomer" brother for my next Patrol dog from a pup again. Most LEO's won't do this, they lack the time, experience or desire. It is far easier to buy a 12 month old dog and go from there. I happen to enjoy it, and I also prefer that I am the only one to screw my dog up. I don't need anyone else's help.
In Boomer's litter, his brother went to the USA Nationals, other siblings are high end SAR dogs, to PD's or sport as well. Not everyone wants, needs or should own a dog like mine. He would be a horrible pet and no one would come to your house. I absolutely love this dog and he is extremely easy for me to handle and a pleasure to work. I am hoping this almost repeat breeding brings me another dog just like him. Yes, there are American breeders producing dogs that work, dogs that can excel at sport or as Police K-9's, but they are not known to the main stream market. Also, most will not keep a dog back for 12 to 18 months to mature and have some foundation work done. I imagine it is easier to keep a dog for themselves and sell the rest as pups. The pups from Boomer's breeder are generally sold before the litter is born and I think that is the case with most excellent breeders.