Federal agencies spent millions more on contractors after missing reduction targets, analysis finds

Contractor contracts surged 35 per cent as 14 agencies dropped their targets and the government scrapped mandatory cuts

By LineZotpaper

Published14 October 2026

Read Time2 min

Fourteen federal agencies that failed to meet their outsourcing reduction targets quietly expanded their contractor and consultancy deals by tens of millions of dollars, a Canberra Times analysis reveals, with mandatory reduction targets now scrapped entirely from 2026-27.

The 14 agencies missed their target cuts for 2024-25 and then opted out of setting new targets for 2025-26. Their combined contractor contracts surged 35 per cent, from $74.2 million in 2023-24 to $100.5 million in 2025-26. In 2024-25, the financial year agencies were expected to slash external reliance, contract commitments for outside advisers and consultants blew out by 42 per cent, jumping from $242.5 million to $344.2 million.

Under the government's Strategic Commissioning Framework, departments and agencies were asked to stop outsourcing "core work", defined as everyday tasks public services should be doing themselves. A recent audit into the framework found departments simply reclassified public service jobs as non-core work, allowing them to spend more on contractors while claiming they were following the rules.

Missed targets carried no consequences. Failing agencies were permitted to declare they no longer outsourced core work and drop reduction targets altogether. Now, following advice that target tracking was "overly complex", the government has scrapped mandatory reduction targets entirely from 2026-27.

AusTender data reflects total multi-year committed contract values awarded to suppliers rather than single-year cash outlays, but the figures still showed a continued reliance on external workforces.

Gaming the system

The escalating contract values drew criticism from the public sector union and critics. Community and Public Sector Union national secretary Rebecca Fawcett said agencies appeared to be "gaming the system" while union members faced severe workload pressures and capability erosion.

"The framework was supposed to drive transparency and accountability, but we are seeing inconsistencies across the board, with an increase in outsourcing spending and flaws with reporting," Ms Fawcett said.

"Taxpayers are still footing the bill for expensive outsourcing while public sector capability is being run down."

Ms Fawcett said the government must tighten the rules with a clear, consistent definition of "core work" and enforceable reduction targets. Senator Barbara Pocock said agencies dumping outsourcing targets had undermined public service capability.

Analysis

Why This Matters

Taxpayers are funding rising contractor and consultancy bills while agencies that miss their reduction targets face no consequences.
The core work reclassification loophole means the framework can be bypassed without penalty, undermining its stated purpose of transparency and accountability.
With mandatory targets scrapped from 2026-27, no formal mechanism remains to hold agencies to outsourcing reduction commitments.

Background

The Strategic Commissioning Framework was the government's flagship policy for curbing the public sector's reliance on private contractors and consultants. It asked departments to stop outsourcing "core work", defined as everyday tasks public services should be doing themselves. An audit into the framework found the definition created a loophole: departments could reclassify roles as non-core and continue spending on external providers while technically complying. Successive Australian governments have shifted between using external contractors and building in-house public service capability, and the framework was intended to reverse years of growing outsourcing.

Key Perspectives

Community and Public Sector Union: National secretary Rebecca Fawcett says agencies are gaming the system, with rising outsourcing spending and reporting flaws while members face workload pressures and capability erosion. She wants a clear, consistent definition of "core work" and enforceable reduction targets. Senator Barbara Pocock: Agencies that dumped their outsourcing targets have undermined public service capability, the senator said. The government: Following advice that target tracking was "overly complex", it has scrapped mandatory reduction targets from 2026-27, leaving no formal target framework in place.

What to Watch

Whether any alternative mechanism replaces the scrapped mandatory targets as a check on outsourcing spending.
Future AusTender data for 2026-27 to see whether contractor and consultancy commitments continue rising without targets in place.
Any government response to the audit's findings on the core work reclassification loophole and calls for a clearer definition.

Sources

The 'core work' loophole: How 14 agencies quietly blew millions on contractors while ditching reduction targets — The Canberra Times - News