Mrego, I think the OP is actually talking about somebody working for a firm that is
in turn contracting with the government, not that the person is
himself working as a contractor.
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What's this I hear about not being able to find work if you've worked for...
a defense contractor before?
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Hogwash. Working for any defense contractor is always good on your resume
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Well, I wouldn't dismiss the notion
completely. While I don't know of any examples myself, I can certainly see
some people who might be hostile to your affiliation with, as they see it, the 'Dogs of War' and choose not to hire you strictly on that fact alone. Surprisingly, most such discrimination is perfectly legal as long as it does not invoke a highly circumscribed list of protected categories - such as race, gender, or religion - which does not include the industries of former employers.
As a case in point, I know a guy who used to work for an online porn company, and encountered grave difficulty in finding other employment afterwards. Note, he wasn't a performer - in fact, he had nothing to do with the front-end creative process whatsoever. He was just a simple IT guy, which meant that he installed and configured the back-office computer servers, networks and databases. Yet the reputation of his industry hindered his ability to find new work. He was much more successful when he began to omit that job from his resume entirely.