Well, the "real" (read: design) engineering work has always been done by contractors. I literally walked out of an interview for the Navy (NSWC Carderock) when I realized that. I went over to General Dynamics and got a job as a mechanical engineer designing nuclear submarines. NASA is the same way, the design work is done by subcontractors. The government agency conducts oversight. So we, the contractors, sent our plans to the Navy for review & approval. Their job was to ensure we didn't screw up and that our plans would meet the contract requirements.

In my experience NAVSEA (the actual Navy side) were all former senior engineers at the subcontractor. They were good engineers and could smell bullshit easily. But that kind of work is very different than the creative side. Some people like being the reviewer better, and the government benefits are generally better, but otherwise I never saw the appeal.