The 'core work' loophole: How 14 agencies quietly blew millions on contractors while ditching reduction targets

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.

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After failing to hit their target cuts for 2024-25, the 14 agencies opted out of setting new targets for 2025-26. But instead of reining in external hiring, their combined contractor contracts surged by 35 per cent, rising 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, their 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 flagship 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 this created a massive loophole as 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 also 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 starting in 2026-27.

While AusTender data reflected total multi-year committed contract values awarded to suppliers rather than single-year cash outlays, the figures 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 government must tighten the rules with a clear, consistent definition of "core work" and enforceable reduction targets, she said.

"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."

Senator Barbara Pocock said agencies dumping outsourcing targets have undermined public service capability. Picture by Elesa Kurtz

Greens finance and public service spokesperson Barbara Pocock slammed the framework's lack of enforcement as "tokenism".

Without mandatory controls, the government had abandoned any attempt to curb reliance on outsourcing, Senator Pocock said.

"Labor has undermined their repeated claims of saving money and building up the public service," Senator Pocock said, pointing to the Greens' alternative policy proposal for a hard 15 per cent annual reduction in consultant spending over five years.

"They have ruined any reputation they might have had of caring for workers, especially public service workers."

Agencies defend spending

The Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Submarine Agency (ASA) were among the agencies that opted out of target-setting after failing to meet core reduction goals.

AUSTRAC achieved less than half of its 2024-25 reduction target before dropping its targets completely in 2025-26. Its labour hire and consultancy commitments subsequently reached $60.9 million, up from $45.7 million the previous year.

AUSTRAC chief executive Brendan Thomas defended the spending and said the agency required temporary specialist expertise to deliver major anti-money laundering legislative expansions at pace.

The agency has also increased its public service workforce by about 60 per cent over two years and internal reviews found fewer than 1 per cent of contractors were performing "core work", Mr Thomas said.

"Much of our external support has been for temporary reform and transformation work, where we have needed specialist expertise and additional capacity to deliver the Government's reforms while maintaining our day-to-day operations."

Similarly, the ASA met less than 20 per cent of its initial reduction target in 2024-25, before abandoning its 2025-26 goals.

The agency committed $20.3 million to consultancies and labour hire in 2025-26, which a spokesperson said was necessary to secure nuclear technical expertise unavailable within the public service or Defence Force.

A government spokesperson defended the framework and said it was only ever intended to target a reduction in the outsourcing of core public service work, not all external labour.

"It does not target all external labour expenditure, as the majority of it is not core work," the spokesperson said.

"APS-wide progress will be reported in the State of the Service Report in November 2026. Agencies are also required to report on implementation through their corporate plans and annual reports."

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