Auditor-general Grant Hehir told a parliamentary inquiry into the public service on Friday that his agency was preparing to audit the bureaucracy's largest users of labour hire.

It coincides with growing scrutiny of the government's spend on contracted workers amid constraints imposed by caps on internal staffing for agencies.

Mr Hehir told senators the Australian National Audit Office would turn its focus towards labour hire after observing the public service's growing use of contractors.

The auditor-general said his agency wanted to report to Parliament on whether the public service was applying standards in its use of labour hire, including rules about integrity, conflicts of interest and cyber security.

He said the audit will focus on two or three agencies who are large and regular users of labour hire workers, and will potentially include Services Australia, the Defence Department and the Department of Veterans' Affairs.

"There's a significant amount of workforce use in the public sector on a contracting basis and the question that we thought was worthwhile asking was what frameworks do departments use to manage that workforce?" Mr Hehir said.

"The expectation we'd go in looking at it is there's a pile of rules around for the APS workforce about expectations you have about how they go about doing their work in the public sector. When you're contracting to bring in staff, do you put similar expectations around them?

"When people bring in their APS workforce, there's generally quite an extensive training program available for them. If they're using a non-APS workforce, what do they do, is it a similar type of thing?"

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Mr Hehir said it would be an audit pointing the public service towards better practices, as there was a lack of information about its labour hire workforce, and there was no whole-of-government set of rules.

"Conceptually you'd have an APS person working next to a contractor potentially doing a similar role, and under the APS framework, you have a performance management framework," he said.

"For a contractor, you'd expect to see a similar type of oversight and performance management framework under their contractual framework."

The audit is not fully scoped and has no start date, Mr Hehir said. However, he expected it would begin this year.

"It's something I'm quite keen to do," the auditor-general said.

The audit office told senators the public service's approach to procurement often fell short of expectations set out in regulations - a result Mr Hehir described as disappointing.

"We often see agencies complying with the letter of procurement rules but not their intent," he said.

The public sector entered into contracts valued at about $54 billion in total during 2019-2020.

Agencies have reported large numbers of labour hire workers in their workforces as staffing caps have forced them to buy in staff from the private sector.

The Community and Public Sector Union's national secretary Melissa Donnelly told the inquiry it estimated the government had spent $7.8 billion on labour hire since 2015, including $2.1 billion in 2020. Up to 20 per cent of the total APS workforce was labour hire, she said.

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