If that were implemented at lower levels of government, it could increase costs for some while reducing it for others. If you're the State of Kansas and want to have software written for management of toll roads and toll payment accounts, you can spend a bunch of money developing it yourself, and then other states can freeload off your work. Or you can contract it out. If that contractor can then sell that same solution to other states, they can offer a lower rate to Kansas. But if they have to make their code available to all, they'll have to charge Kansas the full cost of development. If you're Nebraska and want to do the same thing as Kansas a few years later, you get a benefit from the spending Kansas has already done. Nebraska wins, Kansas loses.
It's more common for state governments to join forces to define standards for data, performance, features, and interoperability, and then require contractors to comply in the contract language.
I'm not aware of many contracts for bespoke software in the state government space; it's far more frequent that someone identifies a need and then develops a solution to bring to market.
