One public sector expert has warned the program is the beginning of a "slow bleed" of the federal bureaucracy that could ultimately see more than 30,000 Commonwealth government jobs lost in the coming years.

The Finance Department has confirmed that "portfolio stocktakes" are underway with government departments being assessed to see if their work can be farmed-out to either the private sector or the commonwealth's growing "shared services" operation.

Departmental bosses will also be ordered to replace their public servants with technology wherever they can and ICON, the high-tech secure communication network linking government departments in Canberra is also being scoped for sale.

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Two "pilot stocktakes" have begun at the Finance and Communication departments in an effort to get the methodology right before all commonwealth operations, including big frontline Departments such as Human Services and the Australian Taxation Office, get the contestability treatment in a process that could take three years.

Finance Minister Mathias Cormann, whose own department is implementing the program, has made it clear that he wants to know which government functions should be exposed to competition from private players and which can be taken over by the private sector.

A Finance Department spokeswoman confirmed this week that the pilot stocktakes at her own department and at Education were in progress and were due to be completed in "early 2015."

"Efficiency reviews" promised for all departments by Senator Cormann, were also underway, according to the spokeswoman with Health and Education the first operations to come under scrutiny from "independent experts".

Public sector finance expert Professor Janine O'Flynn of the University of Melbourne said the contestability program was part of the third phase of the government's public sector reforms and that it could have a larger impact than the first two stages.

"This was the big sleeper on budget night which could have a much bigger impact in the long run on both the scope and the scale (of the APS) than any of the other phases," Professor O'Flynn said.

"Once you get into that area-by-area assessment for potential outsourcing, I think that's where the big cuts are going to come.

"At the time when those 16500 jobs were announced, I made a private prediction that we might hit over 30,000 by the time you include what will start to happen once the contestability framework kicks in.

"It's a rough prediction but once you start to go through the big bureaucratic structure, and start picking pieces off, I think what we'll see is a bigger number [of jobs] than everyone was worried about before."

The government has already shown it will not shy away from privatisations with scoping studies for sell-offs of the Australian Mint, Defence Housing Australia, Australian Hearing Services and the Australian Securities and Investments Commission registry already underway.

Medicare, Centrelink and some Veterans Affairs payment services may be taken over by private players and the Finance Department is also looking at the sale of ICON, the point-to-point fibre connection system that links 80 government agencies at 400 sites around Canberra.