Even when I was a contractor, I never quite understood this. The contractor costs Google whatever it costs the contractor to employ them plus some amount of profit for the contract company. It would be cheaper to just employ people at a contractor's wage and internalize those processes, at least where the contractors are doing similar work to their own employees. It might still not make sense to start doing things like maintenance or cooking.

As best I can tell, it is a different pot of money. In my company, contractors are a budgetary decision, while employees require HR and other hurdles. Similarly, when you want to cut costs, you can fire contractors (shrink the contract and let the contract company do whatever they need to) without making the news with a headline like "Google lays off 10% of its workforce".