> Managers love the idea that contractors can be fired more easily than employees. Except that this flexibility comes at a cost; people insist on being paid more to have an insecure job.

This is true, but it's not the whole of it. In some cases the manager goes to a cabin in the woods to drunkenly shoot at moose with the head of the contracting company.

It's a saying that "the purpose of a system is what it does". I think it's a pretty dumb saying. But it is often worth talking a look at a system and see if the "mistakes" it makes (such as wasting money on contacting companies) aren't in fact desired by some people in the system.