The majority of the contractors are not Americans or third country nationals. They include local militias large and small; mafia-like "insurance" providers. They are organized paramilitary forces and bands of thugs whose loyalty is bought and paid. This payoff money is funneled directly to them without the opportunity for a cut at the federal or provincial levels. To the Karzai government, they are a parallel shadow government. In reality they may be.
"The security companies have to go." - Karzai spokesman Waheed Omar
From the beginning there have been complaints that private firms are poorly regulated, reckless and effectively operate outside local law. They certainly operate outside the constructs of the traditional laws of land warfare. This was viewed as an unique advantage initially, but incidents like the Blackwater shooting in which 17 Iraq civilians were killed in a Baghdad square have created contentious issues with allies and the host nations.
Forces in Afghanistan, particularly our NATO partners', manage to avoid most direct contact with the enemy and casualties by assigning the defense of their support functions, convoys and installations, to contractors. Thus the coalition's ISAF acronym has come to mean: I Saw Americans Fighting.