But instead of capping the numbers of contractors that can be taken on, divisional chiefs at the 17,000 strong department will have their budgets clipped to rein in the spending.

The move is a reaction to the growth in consultants in Defence which has seen numbers double to more than 700 in just 12 months.

The Canberra Times revealed last month that consultants, contactors and other "service providers" now outnumber public servants at Defence, with departmental secretary Dennis Richardson issuing a blunt warning that he would be "a mongrel" if his managers did not keep the numbers under control.

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Mr Richardson has told a Senate Estimates hearing in Canberra that he had a plan to deal with the growth of consultants.

"With consultants, the best way to control it is through money," he said.

"The Defence committee took a decision earlier this week to reduce the money available to consultants from 1 July this year-that is, next financial year-by 10 per cent."

The Departmental Secretary also told the committee that many thousands of those "service providers" were working for firms providing outsources services at military bases around Australia.

"The number of service providers plus contractors and consultants would outnumber public servants," the departmental secretary confirmed.

"There is nothing unusual in that.

"With service providers, you enter into a contract for a particular service to be delivered, and the number of people who they employ to deliver that service is their business.

"For instance, the garrison service contracts we have, that's catering, service providers include caterers and people who mow lawns.

"It is people who do the full range of looking after bases.

"The three areas in which most service providers deliver people are in the area of estate management, capability acquisition and sustainment, particularly in the maintenance and sustainment side of a house and, thirdly, in ICT."

Mr Richardson, who has overseen a reduction of 5000 in his department's workforce since 2012, said it was "dead wrong" that departed public servants were being replaced en mass by expensive consultants.

"You get limited examples of that," he said.

"But it is a furphy that a public servant walks out the door and a consultant walks in the door.

"That is simply a furphy.

"There are limited examples where we can point to that but, in general, that is not the case."

The secretary also provided an insight into what had been done with the money saved through the massive downsizing program.

"You cost a public service in Defence , including on-costs, utilities and the like, at approximately $125,000 per person," he told the senators

"So 5,000 people is roughly $625 million, I think.

"I would say that we have not taken all of that out of the cost structure of the organisation and fed back into capability.

"But I would say we have taken between 400 and 450, around about $400 million out of our cost structure.

"The remaining $125 million has probably fed back into outsourcing, et cetera.

"So there would be an element of that in the increase in contract numbers."