"Privitization" is not new with the Bush administration, but the old system required a study under a process called "A-76" (for the number of the regulation that required it) to determine if the private company could do the work as well but cheaper. All of the studies I was involved in concluded that they couldn't, except for some limited exceptions such as janitorial work, which pay minimum wage (minimum is something like $2/hr less than the lowest Federal wage).

I don't think that the article is saying that religious groups that get government contracts can discriminate on the basis of religion; anti-discrinination clauses are included in most Federal contracts. That part sounds more like its directed at religious groups that are part of the public assistance system (which is another of Bush's bright ideas and an entirely different topic).