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Public Service Outsourcing to be Wound Back

by Cameron Sinclair •
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Commonwealth public service agencies have been instructed to “wind back excessive outsourcing” and reduce their reliance on contractors and consultants before the next budget. 

The Australian Public Service Commission (APSC) has released a Strategic Commissioning Framework (SCF) for all agencies, comprising a set of policy principles to ensure that they “move away from outsourcing work that is the core role of the APS,” and outlining the limited circumstances where it remains appropriate to use ‘external workforces.’ 

There is a notable carve-out in the policy to allow agencies to continue to use external expertise for cost-benefit analysis for major capital, infrastructure, and complex IT projects. 

The SCF will permit the use of external support when agencies require independent advice, are unable to access expertise from within the APS, are unable to fill roles through open recruitment, and where the task is non-core APS work (such as property management, cleaning, construction, and security). 

Agency heads will have until June next year to set specific targets to reduce “inappropriate outsourcing” when identifying a vacancy, business need or capability gap - a clear directive to ensure that all submissions seeking fresh funding in the 2024-25 Budget are in compliance with the new edict. 

It will also force entities to reconsider how emerging priorities and projects are resourced and delivered. 

We expect that the new edict will not have a significant impact on agency use of ICT consultants and contractors in the short term; however, it will likely result in the tender planning process taking longer as agencies begin operating under the new guidelines. 

The framework defines “external workforce” as including: 

  • Labour hire (to perform temporary, general tasks) 
  • Consultants (to perform a short-term specialised role) 
  • Contractors (to perform a one off or irregular task) 
  • Outsourced service providers (procured on commercial basis) 

The framework will initially apply to more than 100 entities employing staff under the Public Service Act 1999.  The immediate consequence of the SCF will be for all agencies to review how existing functions and roles are resourced and to begin the process of converting work being done by labour hire, contractors and consultants to APS employees. 

The SCF provides a series of principles to ensure the APS maximises the benefit of any external arrangements. 

  • Principle 1: Start with rigorous planning (for peaks, troughs, and cyclical work) 
  • Principle 2: APS employment is the default (using ‘non-ongoing’ for temp work) 
  • Principle 3: Use APS networks first (internal transfers, secondments) 
  • Principle 4: Use external support in limited circumstances (as above) 
  • Principle 5: Maximise the benefits and minimise the risk of any external arrangements (these must transfer skills and capabilities over time) 
  • Principle 6: Apply merit when converting external roles (open and reasonable recruitment, assessment, etc) 
  • Principle 7: Monitoring (collecting data) and accountability (set targets) 

The Senate Finance and Public Administration (FPA) committee inquiry into public sector performance in November 2021, identified eight firms as 'significant providers’ of consultancy services to government: PwC, EY, Deloitte, McKinsey, KPMG, Clayton Utz, GHD and AECOM. 


The incoming Albanese Government tasked the APSC to conduct an employment audit of 2021-22 APS workforce data, with the report identifying 144,300 directly employed public servants and an external labour workforce of 53,900, though two-thirds of these (34,926) are for Defence. 

The portfolios with the largest external workforce are: 

  • Social Services, 5,429  
  • Agriculture, 2,643 
  • Home Affairs, 1,694 
  • Veterans Affairs, 1,552 
  • Education and Employment, 1,272 
  • DISER, 1,189 
  • Health, 1,065 

The SCF was released on the first day of senate estimates.  

The release of the SCF comes while we await further information on the in-house consulting unit that is being established inside PM&C, which was allocated $10.9 million in the May budget. 

The unit has been dubbed Australian Government Consulting (AGC) and started a campaign to recruit a team of 38 consultants and support staff in July. 

It will have three teams - Business Development, Capability, and Projects – and be overseen by a chief consulting officer recruited at the equivalent level to a first assistant secretary (SES2, $283,000 to $353,000), while a deputy will be recruited at a level equivalent of an assistant secretary (SES1, $205,000 to $275,000).  

These bands are based on the latest APS Remuneration Report for 2022.

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