The federal public sector's staffing cap has driven spending on contractors to deliver Australia's social security programs, the Commonwealth's largest agency has said.
Services Australia, overseeing Centrelink and formerly called the Human Services Department, said the Coalition government-imposed ceiling on staffing required it to look outside the Australian Public Service.
The department named the average staffing level cap among several reasons it was using contractors to deliver programs.
It told a Labor-initiated Senate inquiry into government service delivery its staff numbers were at or near the limit set for the agency, and it had to look outside its workforce if it received funding for other programs.
"These initiatives come with additional service obligations, and where we are already operating at our ASL limit, it is important to be able to access non-APS resources to make sure we have the capacity to deliver on all of the government's priorities," the department said.
"Employing non-APS staff provides timely access to the people needed for specific and often time-limited priorities."
Services Australia said the staffing limit also required it to use contractors when it upgraded its technology.
While critics of government outsourcing have blamed the trend for draining the public service of IT expertise and leading it into tech blunders, the department said contractors and consultants improved its skills.
"The ability to access contractors and consultants with highly specialised skills helps us to meet needs that are difficult to address through reassigning staff internally, or through APS recruitment," it said.
"Contracting in specialist skills has also allowed for the upskilling of existing APS staff and the acceleration of specific work programs, such as IT projects."
Services Australia has shed thousands of staff under both the Coalition and previous Labor governments, and now employs about 31,000 public servants.
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In the past two years it has spent more than $800 million on labour hire in call centres and its division overseeing compliance with welfare rules.
The department told the inquiry in a submission it would keep permanently-employed public servants at the "core" of its workforce but that it had historically also had contractors, labour hire staff, and service providers paid to deliver certain projects.
"Non-APS staff arrangements are used as a timely, cost-effective way to complement, not replace, the department's current service delivery workforce," it said.
"This workforce mix is not uncommon in large organisations with diverse functions."
Services Australia also said it used contractors to be more flexible in meeting customer demand or in filling roles that were expected to be temporary.
The parliamentary inquiry follows repeated controversies over contracting by agencies, as well as growing concerns about labour hire use amid a ballooning government spend on contractors.