I think that you have to know what great people want in a job and then you need to allow them to do that once they are hired.
Where I work the pace of change is so glacial that no quality people want to work here. Furthermore, the technology and processes used are so out of date that the experience does little to help you find a job.
Fundamentally government, I really mean local government but this might apply to the federal government too, needs to embrace change. It needs to understand that just because it exists as a result of a monopoly doesn't mean that it can continue to go on, business as usual, using 19th century business processes and 20th century technology. As government data and process become more open and transparent the shift will be forced.