They have several words for different types of contracts like outsourcing and privatization but in both the Government is still in charge and contractors bid for the work. That means contractors and employees can be fired a lot more easily than if they were Civil Service.
The FAA here in OKC has a lot of contractor employees working for them and the contract is rebid every few years. In fact, they just changed contractors not that long ago. FAA is in charge and the contractor provides a lot of employees with expertise that the Government doesn't have or would be too expensive to have that many civil service workers.
It is my understanding that this is what the President is talking about when he refers to federalizing airport security -- contractor employees being supervised under a contract with the Federal Government. This would allow employees to be fired and also to have the same standards in each airport in the Country instead of different procedures at each airport. When a company would bid the contract they would have to follow certain guidelines.