You're conflating multiple different things. You can have big government without multiple layers of contractors. E.g. the federal court/prosecutors offices are a pretty huge operation in the aggregate, but it's all distributed so each office or court individually is small and lean.
At the same time, one of the ways to get "small government" has historically been to outsource as much as possible to contractors. That's why the military industrial complex looks the way it does.
At the same time, one of the ways to get "small government" has historically been to outsource as much as possible to contractors. That's why the military industrial complex looks the way it does.