Selling to the government is extremely hard or nearly impossible if you are two guys with a software that could benefit the Department of Defense. The fund could ease the process.
http://www.sba.gov/contractingopportunities/index.html
I'm not sure how much gamesmanship goes on with larger companies using smaller ones as a pass through, but 23% of federal spending is supposed to be targeted towards small businesses.
Another program that might be relevant would be the http://www.sbir.gov/ program(s).
The solution is to fix the bureaucracy, not to throw more money at it.
So you get a grant to work on some subcomponent of one of the major defense contractors (Raytheon, Lockheed, etc). Then you turn around and subcontract that piece right back to the defense contractor, up to 50%. Then you take the remaining work and give it to ex-Defense employees who become your employees for a bit.
So the small business wins b/c they get some % profit plus can do work at a high dollar amount per hour. The big defense contractor wins b/c they get essentially free R&D work on their subcomponent.