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> they can't actually pay enough to hire senior developers directly

I had the impression that it was also easier to fire contractors. (Well, not to renew their contract.)

If a developer who works directly for the government is underperforming, their boss has to jump through many, many hoops to fire them.

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This is close to what I wrote myself, but the problem here isn't being able to fire people because they underperformed. The problem is what to do about temporary jobs that finish. They performed exactly as expected, maybe even exceeded expectations, but when the work is finished, you still need to get rid of the position, and they can't do that with permanent civil servants.

We need to get rid of this insane idea that a job exists for any reason other than the value your work provides to the organization.

On one hand it's true, on the other people want stability in their jobs. You need a compromise between flexibility for the employer and stability for the employee, and one such compromise (in this area) is having a consulting company whose contract with the client can be easily terminated, while keeping the actual people doing the work with a job and stable income.

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