Do you think it is possible to turn a public sector development team into a team that is highly regarded in the development community? Are there examples of it? I'm think of the highest level such as FogCreek, Google, ect., where you can attract the best quality and you output the best quality. One of the main problems that I see with this is that companies like that can and do pay for the best. But we are often told, and I agree, that if you have interesting problems you can attract the talent regardless. The public sector certainly has world changing problems but are they the type of "interesting" that technical people will sign up for?
I am encouraged that some of the brightest bulbs of the past few decades are now getting more interested in public problems. Maybe that will be a start.
Edit: An outstanding development team could really help problems in Social Services and Criminal Justice systems. I fear that a lot of the budget for both those systems is used perfoming tasks that we could make obsolete. So potentially, we could help the "budget crisis". Is that problem interesting?