At my old firm, our federal project profit margin was a bit lower than median, though once you factor in the sales, contracting, and leg overhead the bottom line was somewhat worse than the project actuals made them look. Since our side of the house did relatively short-burn contracts (6-12 months), federal work was generally not that valuable for us; I used it for filler work when our usual sales pipeline was weak. The real value was for the side of the house that did long-term software and support work or heavy citizen support outsourcing, when contract durations can be measured in decades. Same for a friend who inked a $5bn DOD deal; the margin isn’t great, but it’s a 10-year deal that gives her a stable cash flow basis to grow on.
(Also, OP is probably underestimating the full-sheet cost of a federal FTE, as well as the complexities of fund-based budgeting and forecasting.)