The DoD has issues with classifying data, yes, but they have to deal with some odd situations. A good example is a well known (publicly) Air Force project that I can't remember the acronym of but someone Googling could find it in a few minutes I'd imagine. This project used a 30 node Teradata system (NCR) with a combined total of 18TB (36TB if you count the mirror). None of the data was even classified as 'sensitive' on it's own, but after several years of gathering data it was decided by an audit that in aggregate the data was Top Secret. This meant physically moving the servers and logically moving the data along with network/load balancers/IDS and combing through Jiggabytes of data and labeling each... and no, only the data owners could do that so just running some SQL queries against it and going away for the weekend wasn't sufficient.
Don't get me wrong, I've seen plenty of WTF issues with data classification and many other OT issues, but the DoD is a big, constantly moving animal and not all of the appendages talk to one another. I've come to accept something Douglas Adams tried to teach me back in 1987 with Bureaucracy: this is how the government works and changing it would only result in more paperwork.