1. Body shops overwhelmingly exist to abuse the H1B visa allocation system
2. Contractors cost more than FTEs, but it can be booked as CapEx instead of OpEx so looks better during reporting
3. Body shops generally supply subpar labor. People with cooked resumes that are incapable of performing at the same level as their non-body shop title peers.
4. Body shops overwhelmingly arbitrage the fact it's near impossible to legitimately acquire H1B visa allocations and the broken rules about job changes for immigrants on H1B visas.
5. All of this adds up to body shops treating immigrant workers horribly while at the same time largely defrauding their customers and the government offices responsible for visa allocations
TL;DR: Body shops are evil, everyone knows this, management doesn't care because it looks good to shareholders.