The ideal is for things that are clearly a "common business function" to be outsourced to contractors where possible. E.g. things like janitorial services, there's nothing inherently governmental about wiping the commodes down.

Then you have "inherently governmental functions" such as setting and determining policy, obligating expenditure of funds from the Treasury, supervising other civil servants, etc. That has to be done by a Federal employee.

Then you have stuff in-between, which typically was also done by a government employee, except perhaps for highly specialized skills where it made sense simply to pay someone smart to do it for you and then make decisions based on that. E.g. how the Pentagon paid think tanks to do geopolitical analyses, and then evaluated and used those inputs in the decision-making process.

Personally I was surprised to hear that contractors were as embedded as they were in the NSA. Sysadmin is a common-enough function, but has to be considered inherently governmental in the context of the NSA for crying out loud. But then we've been on a long slide toward more and more contractor entrenchment within the halls of government for awhile now, unfortunately.

I'm hoping that if nothing else happens, at least these leaks will arrest or even reverse that trend.