The federal government needs to do more to end the use of consultants, contractors and other external providers to undertake core public service work, the Community and Public Sector Union says.
Responding to revelations the Coalition government built up a massive shadow workforce of almost 54,000, the union said the practice had damaged the public service.
"The financial cost of this rampant outsourcing might be $21 billion, but the true cost is seen when you look at the adverse impacts this has had, and is having, on workplaces and public service delivery every single day," CPSU national secretary Melissa Donnelly said.
"Change is desperately needed. While there have been some positive changes, there is still a mountain of work to do to rebuild the APS."
An audit commissioned by the federal government found in 2021-22, 37 per cent of the public service workforce was comprised of contractors, consultants and labour hire staff as departments and agencies grappling with an arbitrary staffing cap increasingly turned to external providers to help do their work.
Public Service Minister Katy Gallagher, who commissioned the review, condemned the previous government's extensive use of outsourcing to provide services.
"The Morrison government maintained its artificial cap on public service numbers, promoting a mirage of efficiency," Senator Gallagher said.
"But at the same time [they were] spending almost $21 billion of public money on a shadow workforce that was deliberately kept secret.
"The whole time they were up in the 190,000s. It was total bullshit that it was 144,000."
But Opposition Leader Peter Dutton, who was a senior member of the Coalition government at that time, rejected the criticism.
"This [2021-22] was over the course of COVID, and that was at a time when Labor was recommending that we spend another $81 billion," Mr Dutton said.
"There are services that were provided to Australians during the course of COVID that were one-off and there was additional expenditure.
"It's a bit hard to take a morality lecture from them [the government] on finances, because they always spend, they always tax, and they always drive up inflation."
Senator Gallagher said the government had already begun work to convert labour hire and consultant positions to permanent APS roles in a process that would not only restore the capacity of the public service but deliver "reasonably significant savings".
Ms Donnelly welcomed the government's action but warned there was "a long way to go".
She said the entire exercise had been damaging for the APS and had undermined the quality of services it provides.
As an example, the union leader said around half of all service delivery staff employed by the Department of Veterans Affairs were labour hire workers, which "has had a massive impact on the service they provide".
Ms Donnelly said using external providers was more expensive than employing staff directly because labour hire and consulting firms took a cut from the employment arrangement.
"But it has not just affected the bottom line," she said.
"It affects the workers because there is no security of employment and it also effects the capacity of the APS."
Ms Gallagher indicated consultants, contractors and labour hire workers would still be engaged for some tasks, but Ms Donnelly refused to endorse such ongoing use or nominate an acceptable ratio of permanent APS employees to external providers.
"It is increasingly difficult to understand what the argument is for maintaining this reliance on an insecure and external workforce," she said.
"Their engagement in public sector work is bad for the budget, bad for workplaces and bad for public service delivery."