Government Agencies to Bring $49M Technology Project Back In-House

The Australian government’s decision to bring $49 million worth of technology services in-house represents a key step in its broader strategy to reduce reliance on contractors and strengthen public sector capabilities. Finance Minister Katy Gallagher’s recent announcement highlighted a broader initiative to insource $527 million in “core work” across 104 federal agencies during the 2024-25 fiscal year. This move aligns with Gallagher’s earlier pledge to curb contractor use within the Australian Public Service (APS), particularly within critical areas such as information technology and digital services.

The Strategic Commissioning Framework, established to guide this shift, reveals that ICT and digital functions will comprise 22 percent of the insourced work, though Defence is notably excluded from this figure. However, the Defence Department has independently undertaken significant reductions in outsourcing, slashing contractor expenses by $308 million. Defence CIO Chris Crozier shared that the department has made significant strides in rebalancing its workforce, shifting from a 20:80 ratio of staff to contractors to a 60:40 ratio, underscoring a substantial pivot toward internal capacity building.

The Australian Taxation Office (ATO) is also joining the push, aiming to cut $31.9 million in outsourced IT, service delivery, and data analytics work by 2024-25. The ATO’s plans reflect the government’s broader aim to decrease outsourcing in areas it views as core capabilities. According to the framework report, a majority of the 67 government agencies surveyed have relied on external contractors for ICT and digital tasks, with 55 of these agencies indicating that bringing such roles in-house would be challenging due to the current skills gap and entrenched reliance on contractors.

Minister Gallagher’s commitment to reducing contractor dependency is part of a larger APS reform agenda focused on rebuilding internal capabilities to provide high-quality public services.

In recent years, Senate findings have underscored what they termed an “unhealthy reliance on IT contractors” within the Australian Public Service (APS), sparking concerns about both the resilience and self-sufficiency of the nation’s public sector. The heavy dependence on external contractors and consultants for critical technology and digital roles has raised questions about the APS’s ability to maintain operational continuity, safeguard sensitive data, and effectively respond to evolving technological demands. Finance Minister Katy Gallagher’s push to reduce this reliance reflects a commitment to reshaping the public sector’s approach to talent and capability management, with a focus on bolstering in-house expertise.

By transitioning critical roles in technology, ICT, and data analytics back into the public sector, the government seeks to foster a more resilient and capable APS that can more directly control its core digital functions. This shift is seen as essential not only for reducing costs associated with outsourcing but also for enhancing public accountability and ensuring that strategic knowledge remains within the government. Bringing these roles in-house allows federal agencies to build institutional knowledge, develop career paths for skilled workers within the APS, and strengthen the alignment between public sector needs and the capabilities of its workforce.

Additionally, Gallagher’s efforts align with broader objectives outlined in the Strategic Commissioning Framework, which was introduced to guide the government’s approach to reducing the use of contractors and consultants. The 2024-25 target, revealed in an updated framework report, shows a total of $527 million worth of “core work” set to be transitioned in-house across 104 government agencies. This includes $49 million specifically in technology services, with ICT and digital work accounting for 22 percent of the core work being brought back under public management. Agencies are thus expected to create more stable and integrated systems by relying on internal teams rather than temporary, external expertise.

For the APS, this transition represents a significant cultural and operational shift. The Australian Taxation Office, for example, has already announced plans to cut $31.9 million from its 2024-25 outsourcing expenditure for IT, service delivery, and data analytics roles. Similarly, the Department of Defence has seen a notable reduction in its reliance on contractors, with a shift from a 20:80 to a 60:40 ratio of staff to contractors under the guidance of CIO Chris Crozier. This shift is anticipated to strengthen the APS’s capacity to meet future challenges, reduce operational risks, and facilitate a more sustainable approach to managing Australia’s digital infrastructure.

Minister Gallagher has emphasized that the goal is not only to reform the APS’s approach to talent management but also to build a public sector workforce capable of delivering the essential services that Australians expect. The strategic move to bring critical roles in-house aligns with a vision of a public sector that is agile, well-equipped, and increasingly self-reliant. By investing in the internal workforce, the government hopes to create a public service that can better adapt to technological advancements, enhance security and privacy protections, and build the long-term institutional capacity needed to support Australia’s public administration for the future.