The Australian Public Service (APS) outsourcing targets have been officially abandoned, even as new data reveals a staggering $12 billion increase in external expenditure over the past five years. The decision, confirmed by the Finance Minister, marks a significant shift in government policy aimed at reducing reliance on private contractors.
Background of the Outsourcing Targets
Introduced in 2016, the outsourcing targets were designed to cap the proportion of work contracted out to private firms. The goal was to rebuild in-house capability and reduce long-term costs. However, the targets were widely criticized as being unrealistic, and compliance was inconsistent across agencies.
The $12 Billion Surge
According to the Australian National Audit Office (ANAO), spending on external contractors, consultants, and labour hire rose from $8.2 billion in 2017-18 to $20.6 billion in 2022-23. This 150% increase occurred despite the existence of the targets, underscoring their ineffectiveness. The surge was particularly pronounced in IT services, engineering, and management consulting.
Government's Rationale for Scrapping Targets
Finance Minister Katy Gallagher announced the removal of the targets, stating they were 'not fit for purpose' and that a more flexible approach was needed. 'The old system was bureaucratic and did not deliver value for money. We need a smarter way to manage external work,' she said. The government will instead focus on improving procurement processes and strengthening oversight.
Reactions from Stakeholders
The Community and Public Sector Union (CPSU) expressed disappointment, arguing that the move undermines efforts to rebuild the public service. CPSU National Secretary Melissa Donnelly said: 'Scrapping the targets without a credible alternative is a green light for more outsourcing, which wastes taxpayer money and erodes public sector expertise.' Business groups, however, welcomed the change, citing the need for flexibility to access specialized skills.
Impact on Public Service Capability
The ANAO report highlighted that the surge in outsourcing has not been matched by improvements in contract management. Many agencies lack the capacity to effectively oversee large contracts, leading to cost overruns and poor outcomes. The government's new approach will include mandatory training for procurement officers and stricter reporting requirements.
Future Outlook
With the targets gone, the government plans to introduce a new framework based on 'value for money' assessments rather than rigid caps. This includes a centralized register of external providers and annual reviews of outsourcing spending. Critics warn that without clear benchmarks, the $12 billion surge could continue unchecked.
