If you have thousands of machines running an OS that works perfectly well for your purposes, then you only upgrade when support lapses, which is 2014 in this case.
I'm not buying it. This is the reason always given, and in real life I've not come across this as the actual reason. 99% of the time it is lack of staff and will not lack of "We don't know how to make the adjustments to make it work."
I've also seen universities with faculty and staff still using IE7 not because of infrastructure requirements, but just because nobody had come around to upgrade because they hadn't bitched loudly enough.
I don't know the internals of the DOD, but I bet that it's not too much for the costs (that doesn't seem to be a big problem there), but the human resources being used in other priorities.
At the large research university I work at in a lab, almost all of the computers run XP, and a few even run Windows 2000. Is it frustrating to use IE6 on the Windows 2000 computer? Yes. However, the software for the old equipment we have is designed for Windows 2000, and most likely will never be upgraded, for lack of support for newer OSs. I don't think (anecdotal evidence) that a 10-15 year refresh cycle is absurd on some machines. That being said, for the entire DoD to not at least update some of their workstations is a little incredible.