That sounds incredibly expensive. I think these companies just price software that way because they don't get a lot of contracts through out the year, if they make only custom software for governments, and they need to make every license very expensive to survive. Then the government pays up, because what the hell - it's not really their money.

So I don't think the prices these companies are asking from governments is in any way related to development time of the software, or even with maintenance time. I think it's mostly based on how much the government is willing to pay.

And I disagree with your last remark, too. By that logic the government can just spend it on anything and as much as they want. They need to be efficient with the money, to be able to make or sustain multiple projects at once. Otherwise they'll have to raise taxes, fire people from other programs, or they wouldn't start new needed projects.