Yes, I didn't know the expression "local rewrites" but that seems to capture it well.

My bet it's another version of the inverse of Not Invented Here https://en.wikipedia.org/wiki/Not_invented_here where the IT department or a random manager claims that whatever was generated is "theirs" implying agency. They don't realize that each iteration will get harder and more expensive (bigger context window) while alternatives have accumulated thousands and thousands of "bugs" or even just usage highlighted limits of their implementation. So they are re-inventing their version at great cost and in the end the difference between what they worked on is basically equivalent of open source equivalents but with no community support and instead a dependency on models and infrastructure they don't own.