This strikes me as a very badly misguided definition. Not even Richard Stallman, founder of the Free Software Foundation, believes software must be “free” as in “free beer” (though if it is, all the better, of course).
Yet the government’s specification is full of references to “non-commercial”, “free of cost” and “without any royalties”.
It is, of course, perfectly within its rights to specify a functional requirement for an open standard. But demanding that it is free, that it is maintained by a non-commercial organisation, that all intellectual property is given away for free, is going way beyond any reasonable, functional definition of “open standard”.
It excludes any supplier that provides software conforming to perfectly open, accessible, and functionally satisfactory standards, but does so for a fee. It might even end up excluding all those open source developers who spent their twenties toiling away for free in the vain hope that one day, they’d get to pay for their sports cars and luxury homes from support revenue.