Senior defence IT staffers said their jobs have been in limbo since the department decided to outsource their work three years ago and that they still have no timeline for redundancies.
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A senior IT staff member within the Chief Information Officer Group said they have been kept in the dark and they are living in a toxic atmosphere of fear.
Defence first flagged outsourcing parts of its IT services and hardware in August 2011 and made public that the main contract - worth about $800 million - would be handed to the US military contractor Lockheed Martin in May.
The company, along with other sub-contractors, will take on the massive task of storing some of the country's top military secrets in new data centres. Some of the newly recruited Lockheed Martin employees will start moving into an office in Civic over the coming months.
With the deal secured at the start of the year, remaining defence staff claimed voluntary redundancies or redeployment were first raised as options only three weeks ago, at a Town Hall meeting on August 26.
The mid-ranking executive, who has asked to have his identity protected, said even at the August meeting there was no clear timeline of when and how staff should apply for redundancies or redeployment options.
The employee said the staff left to manage the transition to outsource the department's work feared for their future.
"They're scared, it is really horrible for the people who work here and it is appalling how defence is treating its own staff," the staffer said.
A department spokeswoman said "specific timings" for redeployment and redundancies had not been provided to staff because the department had to wait for the deal to be officially signed.
She said redeployment would be the first option and then "voluntary redundancies will be offered to any employee who is unable to be reassigned and consequently declared excess".
Rupert Evans, the Community and Public Sector Union's deputy secretary, said he was concerned about the increasing volume of work outsourced to the public sector and the "loss of expertise and capability within Defence will take a generation to replace".
"So what looks like a win for Canberra is likely to be a net loss when lost public service jobs are taken into account," Mr Evans said.
The CPSU confirmed the August meeting took place, but said its priority was looking after affected Defence staff.
The move - dubbed the Centralised Processing Project - is part of the department's wider reform program which aims to gain $1.9 billion in technology savings from 2009 to 2019.
