There has been a concerted effort by the Bush administration to replace civil service worker with contract employees. I've been hearing about it around the extended family dinner table for years. I have a relative who works for a Federal regulatory agency who has said this has been policy from day 1.
There are good reasons for this, from a Bush perspective, especially wrt regulatory agencies:
1) Directing Federal funds to cronies, as the agency providing the contractor takes its cut. This is obviously a real potential boost to fund-raising.
2) Providing a channel to influence how people working at civil service rather than politically appointed jobs. Contractors have two bosses, the one at the agency, and the one at the office.
3) Weakening institutional memory and stability. By using short-term contractors, the administration makes it more difficult to use agency experience with past events to more wisely deal with current issues.
4) Making it easier to shrink the agency. It's hard to fire civil servants. It's easy no to renew a contract.
5) Making it easier to influence civil servants to break work rules. One of the reasons rules controlling access to, say, passport records, have teeth is that if you do break the rules, and are fired, you stop contributing to your pension, stop accumulating service time toward retirement and are booted out of a great health care plan. If your contract is terminated, all that happens is your employer sends you to some other assignment.
The Obama passport snooping incident is made more suspicious because the perps were contractors. The sanctions that applied to them are weaker than those applied to civil service staff, they could well have more loyalty to the interests of the agency that put them into the job.
Of course, the use of contractors creates the possibility of dirty tricksters penetrating the agency intentionally. It's a lot harder to turn a civil service employee than it is to introduce a mole.