I believe this effect greatly contributes to why government IT systems are so bad.
When you're writing a procurement contract, it's relatively easy to describe what the requested system must do, but almost impossible to enforce a great UI design, as great UI design isn't objectively measurable.
As a contractor, you're optimizing for minimum money spent, so if good design is not required, good design gets sacrificed first.
One solution to this specific problem would be to conduct user surveys on how pleasant the system is to use, requiring a specific score before the contract is deemed completed.
This trend manifests more generally in bigger organizations. Smaller orgs let people judge things subjectively, so all possible aspects are taken into account, making those things relatively good; this is why startups succeed. In a bigger org, there are often objective judgement measures to prevent the influence of personal biases, politics or even bribes. However, those measures poorly reflect how good the thing in question actually is. This is why a big corp might produce worse software, even when competing against a small and underfunded startup.
As an example, Apple exempted the first iPhone crew from most internal company procedures, creating a quasi-startup inside Apple. Steve Jobs always had the final say, and his opinions were based on what he thought personally, not on how many points in a requirements specification were satisfied. I believe this was one of the reasons for the iPhone's success.