It is not in government's interest, but government has to follow the laws passed by congress, and keeping budgets hamstrung so that it's impossible for agencies

It is not in government's interest, but government has to follow the laws passed by congress, and keeping budgets hamstrung so that it's impossible for agencies to compete with the private sector keeps the private sector lobby happy. Politicians' incentives are not to create effective government, but to keep getting elected. Having an ineffective government satisfies their financiers' desire to have less competition for top talent, and gives politicians an easy problem to campaign on fixing during election season, by never targeting the real problems. Break some windows so you can claim credit for trying to fix them, and then blame the opposition when it doesn't work. It's a game where everyone wins, except the dupes that keep voting for them.