Drupal does really make sense for government. Federal, local, or municipal agencies can benefit from opensource software, and the OpenPublish project aims to make a government-centric Drupal distribution.

Generally though, government has been very slow to adopt opensource software.

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From the project's page:

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Presently, Federal agencies are embarking on creating new websites and web-based applications at an unprecedented pace. This new breed of sites are being designed to improve citizen services, provide public access to data and provide a public forum for two way communication with agencies. Yet, government web sites have unique needs, and until now, many content management systems (CMS) and procurement processes have poorly served this market with proprietary solutions that limit innovation and foster unnecessary replication of closed-source software code.

Open source software makes sense for government web sites - perhaps more so than for any other sector - because of its emphasis on community innovation, flexibility, and non-proprietary nature. Now, more than ever, budget pressures for the coming fiscal year demand low cost solutions that can be delivered through open source software and quick delivery schedules that limit wasted resources.

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More information can also be found on Phase 2's site.