The government can only do business with companies who aren’t in it for the money?
From time to time, HN features high quality UK gov't websites. In the last five years, the UK gov't has made dramatic strides on "digital gov't" initiatives that benefit regular citizens. As I understand, most of those sites are built and maintained by gov't employees. This runs counter to the normal, all-prevailing attitude in UK that "any gov't is too much gov't" (or "any gov't that does not directly benefit me...").
I'm fully in favour of governments doing everything from hosting up ( hosting, design, dev), with as much as possible open source.
For instance the French government fares well on this front, with most government services being developed in-house, and many parts are open source; in emergencies specific services were delegated to third parties ( e.g. vaccine bookings) so it isn't taken to a religious NIH level. However hosting is delegated to commercial entities.
But no, typically things like that don't hurt small companies.
IANAL, but how about something like, "Government services offered via WWW must not contact commercial servers and must be fully usable with non-JS browsers."