Nearly everyone who does real work like this for the government is a contractor anymore. The government employees manage the contracts.
It's notoriously hard to fire public servants, or shut down underperforming departments.
It's comparatively easier to shut down an outsourced project, or switch suppliers.
(Alas, not easy enough; and the organizational skills required to win government bids are different from those required to actually deliver quality.)
The Apollo program was run by NASA, who had lots of government employees, but at the same time all the hardware and much of the software was built by contractors. The Apollo program was behind schedule and over budget for most of the project period.
NASA originally estimated the cost to somewhere between 7 and 12 billion USD; NASA Administrator increased this to 20 billion USD in 1961, but it ended up costing more than 25 billion USD in 1973 dollars.
In that case at least
a) There's no need to pay extra for the profit margins of the contractor companies (and the inevitable sub-contractors they use)
and
b) The incentives of the people doing the work are likely to be closer to the original project, in that the people doing the work are in the same organization as the project.
For me, outsourcing makes sense if the organization doesn't have enough of the specific type of work to have a fully staffed internal team, so specialist services, or if they are obliged to get an external opinion (e.g. auditing/pen testing). Otherwise you're just adding more layers of profit seeking middle-people...
I'm not so sure about incentives. The incentives aren't necessarily great in either situation. See also https://en.wikipedia.org/wiki/Public_choice
Have a look at eg the outsourced Danish firefighters. Seems to work just fine, but would be unthinkable in most countries, including the US. (Btw, Americans have more firefighters per capita than about anywhere else.)
"Shrink government" shouldnt be taken at face value.
It's relatively hard to get any work done at my job during the month of April, because about half the building is 85-88F (in a temperate mid-atlantic climate). That means that people will work in other cooler offices (problem when no one carries a cell phone) or just find reasons to leave early. I used to battle about this, but then I learned that it was for the unmovable ideal of economizing. Unfortunately, I'm a victim of economizing a 1970s building with huge plate glass windows that don't open.
Second example:office supplies. A supervisor asks me to have a room set up for a meeting. After determining that what I need is not kept on hand, I try to buy them through the government catalog as I'm supposed to. My internet connection fails, so I reboot my desktop (roughly 20-30 minutes). When it fails again, I lament that I probably have a dozen faster computers at home, ranging from 10 year old tablets to a raspberry pi, and with that I take the opportunity to step away from my office (low 80s in the summer, when this takes place, because the AC can't keep up.) I go down to my car where I can use my own air conditioning and my phone to look at the same website. The supplies aren't on the catalog, so I just order them for $10 on Amazon. Fast forward one week, when my supervisor asks how I have it ready so soon, and I get criticized for buying the supplies outside of the supply system with my own money. I place too high a value on my sanity, apparently.
Edit: I should mention that most people at this office are paid quite well relative to the area
I find this mind-boggling but that's how it is.
How long before that's outsourced to Accenture too?
Edit: if only this was a joke.
I think there is some observational bias going on in this thread.
On the other hand the commander of the group I was doing work for pointed out that a fully trained Marine private was far to costly an asset to waste checking visitor ids.