Contractor shell companies cost the government more in lost revenue than they save.

Evidence

KBR officials claim that the practice saved the military money by allowing it to perform work more cheaply. But a Boston Globe investigation noted that the maneuver “results in a significantly greater loss in revenue to the government as a whole” while giving KBR a competitive advantage over companies that are not using the loophole. The use of shell companies not only lowered KBR’s contributions to the Social Security and Medicare trust funds, but also meant that its employees could not receive unemployment benefits if they lost their jobs because they were technically employed by a foreign corporation. — David Vine, Base Nation_ How U.S. Military Bases…, 727