For one federal organization I work for literally everyone I work with and talk to at all levels seems to be a contractor except for a couple people. the ratio is at least 20:1 contractors to federal employees. As for why this is, it's mostly related to the reasons I mentioned in my wall of text
There are just so many of them that it projects the attack surface of the DoD out; now you can attack contractors which aren't as tightly regulated, and they might hire people to, say, build their website that aren't even cleared. So now I can steal some web dev's credentials and pivot towards classified networks.