Suppose you are on a committee where you are evaluating 3 different offers to build a website for your city. Bid A is for $10m, Bid B is for $9.5m, and Bid C is for $9m. The company that made offer B knows that they will likely lose the contract so they counter. "If you let us keep the source code and it remains private, we will bid $8.5m for the contract". Since all three vendors are offering equivalent service, and…
if those other pressing needs are so pressing why aren't they looked into already, and is only mentioned when a tender offer is on the table?
The gov't ought to consider each individual need individually and budget it individually.
As for the company B offering 8.5m for keeping the source code private, i would argue that they are getting a better deal out of the gov't than the gov't is receiving.
Imagine if the company B can resell the software for money to another govt. This means the initial gov't paid for the research and development of the software, but the company B is reaping the benefits - all for paying a measly $500k. If the software can sell for more than $500k to the 2nd customer, they'd have made pure profit.
Therefore, the gov't who initially paid to do the R&D should actually own an equity stake in the software if it is to remain private. After all, the taxpayer funded the risk of R&D, and should partake the benefits of that risk.