Having worked with military retirees, even those involved in the developement of new equipment, being ex military myself, and currently working directly with those sorts of military and military civilian employees, I can safely say that most of them do not in fact have such skills. Some develop them later, or on the side, but the plain fact is that government employees manage contractors, they rarely actually do such work. That's hardly y a recent thing either. My own military experience, doing exactly that kind of thing, is now 30+ years old. But as I say, I've also kept in touch with that world, both as a military reservist and as a defense industry engineer, so it's not like things could have changed for the better (they've actually changed for the worst) and I'd not been aware of it.
That's not to say there's not a place for such folks. They can make good managers, since that's what they've been doing all along, and they can also be "marketeers", in both the negative and positive aspects of that term. The positive aspects being they know the system, and the needs of the military, and are technically savvy enough to be able to translate the military "requirements" into something the engineers and software folks can actually work to.
There is a lot of truth in what you say. However, there are still sections in the government where government employees develop the software and do the engineering. It isn't common, but I like it when I encounter it (as a management type myself) - when the government develops and owns the software, we don't get raped when we want a change made.
I'm looking at one project now where it looks like the government has its own software that the engineers think can be modified for about $30K in salary. A private company has offered to EXPLORE doing the work - for $300K. With a bit of luck, later this summer, I'll be able to tell the company no thanks...