Two comments:

Just like you can't use a hammer for everything, you can't use Open Source for everything either.
Even if the government places requirements that the software be open source (which isn't the issue, but is an even more extreme circumstance), how would that be a problem? If MS wanted their business, they would give them the source code along with the software. That doesn't make it Free software by any means, it just means the govt has the source code and can modify and study it for their own needs (not redistribution or derivative works).

Also, I feel that it is a reasonable position that the government should not use products that place control of future access to its data into the hands of a profit-minded entity. Such a move would only cost the public more eventually. If the vendor is unwilling to document their data formats, asking for the source code is the only other logical alternative. Again, this does not make it Free software, but simply takes future control away from the (proprietary) vendor.