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They can't because when they fail the public and then congress wants to cut their budget. NASA can no longer innovate and maintain funding.
I hate that I have to put this qualifier but this is NOT an endorsement of musk.
I don't know why people are downvoting me, I'd love it if NASA could innovate the way private companies can, but they just can't. The way SpaceX is currently developing Starship would not be possible if NASA was doing it. (And no I'm not endorsing Musk I wish the company was owned by someone else)
https://en.wikipedia.org/wiki/NASA_spinoff_technologies