Its still not as clear cut as I make it sound. Another potential model is for the government to partially fund development. For instance, if the government wan

Its still not as clear cut as I make it sound. Another potential model is for the government to partially fund development. For instance, if the government wants a piece of software that costs $1,000,000 to develop, a company might offer to develop it for them for $500,000 and the rights to resale it to other customers. This isn't an intractable problem though. You would just need to make a clear delimination between what components the government is paying for, and which ones is coming out of the company's R&D budget. Due to billing, this is already how many of these projects work, but the publicly funded portion is often far less useful without the privately funded portion; and there often is not a good solution to this (think a government funded plugin to Microsoft Excel, where an Excel license costs $5,000)