This is a really bold argument. Could they have gotten away with "we hired contractors to do all the viewpoint tagging and just defunded whatever they said"? I feel like that should still count as the government doing it, given they instructed someone else to make a decision on x and y grounds. But why would a lawyer even think it's a defense?

This implies that the government respects the rules or at the very least pretends to do so. To me it's pretty clear that the US federal government has moved beyond that.