Your linked article doesn't really offer problems with contracting.
Nay, the problem is how government allocates money & materiel,
eg, abandoning much of it overseas.
By 'contracting', I mean 'the contracting process', not the use of contractors in and of itself.
There are several issues highlighted with how the contracting process is managed, including the general structuring of contracts as expense plus margin without clear capping or change management processes.
I'm a contractor myself (state manager for a large professional services company), and deal with a lot of government contracts (mostly federal and local, only occasionally state).
But also my area of speciality when I was consulting (rather than managing) was in project controls and contracting processes. So I tend to think of the area almost exclusively in terms of process. Contractors themselves will run the full gamut in terms of size, quality, professionalism, etc, and I know there are outstanding contractors around in most fields well worth the money.
Crappy processes lead to waste, inefficient execution, and sometimes erroneously blaming or rewarding the 'wrong' contractors, which is frustrating as hell to those contractors trying to both properly service their clients and turn a profit.
I don't suspect I'm telling you anything here you don't already know though...