The government isn't shy about spending on defense, it is shy about spending on people. GS and GG pay scales aren't that great when compared to industry positions. Consider that GS-13 is often the max for SMEs in many engineering disciplines across the fed until you get into PhD territory (to stay technical, management roles more easily go up to GS-14/15). GS-14/15 if you're in cyber and somewhere like the NSA, maybe. And while that's better than GS-13, you're talking about capping at around $200k or a bit better in high cost of living areas with skills and clearances that could make you much more in industry.
probably an element to it of not attracting the wrong people, they recruit largely fresh out of college and I think the expectation is that people stay, akin to a career in civil service.
If you had people cycling through one of the most critical branches of US intelligence at startup pace primarily motivated by money that probably creates some issues. Because they probably care where these people wander off to when they leave the agency
"The geeks who man the NSA don’t look much like Julian Assange, because they have college degrees, shorter haircuts, better health insurance and far fewer stamps in their passports." -- Bruce Sterling
If you go looking around on linkedin or crunchbase, you'll find numerous 10-50 employee defense contractors. Having known a few individuals employed this way, I would rank them as smart, capable, highly technical and easily capable of working at FAANG. They're getting comparable compensation/benefits with far less stress, and probably work on more interesting problems than the average Googler.
