Here’s a good point from blogger Matt Yglesias:
I think the more interesting issue is how it alters the lobbying dynamic. An established government bureaucracy has, of course, considerable capacity to lobby on behalf of its own interests. That’s particularly true when the bureacracy’s leadership can claim possession of secret information. But it’s also constrained in certain respects. The National Security Agency can’t bundle campaign contributions, give money to independent expenditure campaigns, or offer nice paydays to former congressional staffers.
But if you take a few billion dollars worth of intelligence spending and transfer it onto the Booz Allen balance sheet, then political organizing around the cause of higher intelligence spending can avail itself of the tools of private enterprise along with the tools of bureaucratic politics.
Outsourcing of government work — often mislabeled “privatization” by both opponents and advocates — can lead to bigger government.