Certainly not. I don't believe progress is always good. But subsidies should be reserved for ambitious projects that push the state of the art forward. For those projects that realistically will not get funded commercially. CERN, for instance.
At the very least, it works as a bargaining chip when it comes to negotiating contracts with the private sector.
If you develop an in-house tool, you have very predictable user numbers so you can go on-prem versus cloud for the compute and save ~10x on that side.
You also have the benefit of being second, the other guys already did the hard work of UX research etc. and your in-house team just needs to replicate a slightly complicated CRUD app.
The one significant roadblock I can see is being able to put together the right team for the job. But cost-wise it has to be a no-brainer that in-house is cheaper.
They are putting their resources into the development of a product that can be universally shared and used. There is no favored party.
Also, I completely disagree with the "ambitious projects". I actually would favor the government let all the risky ventures to private enterprises and focused only on tried-and-true developments and make them universally available to its citizens.