The Defence Department has doubled its spending on public servant redundancies, while its bill from contractors soars towards $2 billion.
More than 320 internal staff headed to the exit door with redundancy packages last year, while redundancies and separations cost the department $30.5 million, up from $13.3 million the previous year and the largest figure since 2016.
Unions say the department's failure to change under the constraints of restrictive industrial rules is encouraging public servants to leave its ranks for the private sector.
Defence says it is realigning its Australian Public Service workforce to deliver priorities set out in the nation's latest defence strategy, and its defence force structure plan.
"Redeployment to new roles is always the first approach and where this is not possible, a voluntary redundancy is offered," a Defence spokesperson said.
The Defence Department's latest annual report shows the jump in redundancy package spending coincided with a 340-staff fall in its headcount of public servants.
Budget papers this year also showed the department's average staffing level of civilian employees will fall by 100 in 2021-22, to 16,400, but rise marginally across the three-year forward estimates.
Professionals Australia ACT branch director Chris Dyer, representing Defence scientists, says the redundancy spend reflects the department's failure to change.
"New classifications for technical and professional staff are urgently needed, but the government's public sector bargaining policy prevents the creation of new classifications, forbids any enhancement of conditions and artificially restricts wage growth," he said.
"In the meantime, the Defence Department continues to lose staff to the private sector, with the availability of voluntary redundancies encouraging many out the door."
Mr Dyer said the government was increasing defence spending as a proportion of GDP while budgeting for a decline in its total public servant workforce.
"That means less internal capacity to assess the value of defence contracts while continuing to spend heavily to acquire defence capability," he said.
"Defence needs to invest in developing and retaining a highly-skilled, well-trained professional and technical workforce to ensure defence capability can be delivered in a sustainable and cost-effective manner."
Community and Public Sector Union deputy national president Brooke Muscat said the Defence Department had lost 21 per cent of its staff since 2013 under restrictions set by the Coalition government's staffing cap.
"The cap makes recruitment exceedingly difficult for the Department of Defence, causing it to overly rely on contractors and labour hire who do primary APS work," she said.
"Under this government we continue to see the outsourcing of critical national security and defence work.
"The Morrison government needs to rein in spending on contractors and immediately invest in the department's capacity by axing the departmental staffing cap."
Contractor numbers are soaring at Defence, growing from 4700 to 6800 in the last two years, while the department estimates its spending on contractors has grown to $1.87 billion.
Senior analyst at the Australian Strategic Policy Institute, Marcus Hellyer, has estimated contractors cost about two-and-a-half times as much as public servants, equalling about $1 billion in difference each year across the workforce.
"One way of looking at it is you are losing $1 billion in capability, because that money instead of buying equipment is paying for the people who are buying the equipment. And that really is at the crux of the value-for-money issue," Dr Hellyer said.
The Defence Department has not evaluated the value for money of using contractors instead of internal civilian staff. Dr Hellyer said the lack of departmental analysis was concerning, and more information was needed from Defence about its spending and use of contractors.
"My gut feel is that we have reached the point where we have outsourced so much that you don't any longer have that core expertise in-house that you need to essentially run projects responsibly and accountably," Dr Hellyer said.
He said while he did not know what the right balance of public servant and contractor workforces was, there were signs the current system was not working.
The Defence Department spokesperson said it used a blended workforce of public servants and contractors to meet the priorities of the government.
"Where specialist skills are in high demand and cannot be recruited by Defence, service providers are engaged to undertake the work and to surge where required," the spokesperson said.
"Services delivered by contractors are generally specialist in nature, particularly to support the growing capability acquisition program in response to our changing strategic circumstances."
A recent national audit report found contractors had been involved in decisions increasing the value of their company's contracts in a $364 million program to overhaul the Defence Department's IT systems.
The Australian National Audit Office warned low levels of public service representation across a contractor-led program could create oversight risk for the department.
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