The structure of the Australian Defence workforce is changing.
Defence has confirmed its intention to rebalance capability delivery across the Australian Defence Force (ADF), Australian Public Service (APS), Managed Service Providers (MSPs), and industry subcontractors. This shift is already affecting how work is delivered across Defence projects, engineering programs, ICT initiatives, and classified operations.
For professionals working in Defence jobs, particularly subcontractors, understanding these workforce changes is critical.
So what’s actually happening in the Defence labour market, and what does it mean for subcontractors with Baseline, NV1, NV2, or TSPV security clearances?
What changes have already happened
Subcontractor numbers within CASG and DDG have been declining for the last 3+ years, largely driven by APS workforce expansion and a reduction in outsourced subcontractor spend.
The most noticeable reductions have occurred in:
Non-technical program support roles
Baseline and NV1 clearance holders
PMO and project management roles previously delivered by subcontractors
Many of these functions are now being absorbed into the APS as part of Defence’s effort to build internal capability and institutional knowledge.
This impact has been felt most acutely in the Canberra market where the above-the-line subcontracting workforce is centred.
In contrast, intelligence agencies and highly classified programs have remained relatively active, with strong ongoing demand across:
Cyber security and intelligence
Engineering and technical specialists
Highly classified Defence programs requiring NV2 and TSPV cleared workers
More TSPV roles have been created outside the traditional Canberra location, including in Brisbane, Melbourne and Adelaide.
Below-the-line, primes and SMEs have been focusing on delivering current contracts and upskilling their current workforces, creating a cautious hiring market. Subcontractors are being used to fill gaps caused by long permanent hiring processes, which take on average three to six months. The contracts on offer have decreased in length, with between three and six months being the average initial offering.
Demand for blue collar subcontractors has increased.
What is still to come
The establishment of the Defence Delivery Agency (DDA) in July 2027 will mark a transformational period, shifting the focus from contract management to project delivery. Budgetary control and accountability will improve, with Defence confirming that all funding will tightly align with the seven Sovereign Defence Industrial Priorities (SDIPs). This shift is aligned with the focus on achieving speed to capability through a Minimum Viable Capability (MVC) model.
A restructure of the MSP operating model and the planned establishment of the DCSP are both scheduled to take place in 2026. This has caused uncertainly around the structure that contract extensions might take, and has added to the overall feeling of hesitation.
Major initiatives such as the Defence Strategic Review and REDSPICE will drive future subcontractor demand significantly as they expand cyber and digital roles over the next decade, particularly within ASD. As subcontracting is far more prevalent in ICT than in other Defence disciplines, this will create subcontract opportunities. An underlying capability shortage, especially in highly technical roles and high-clearance levels, remains.
What this means for subcontractors
When subcontractors are used, there is pressure to do more with less, and quality is being scrutinised. The expectation is that milestones will still be hit without increased investment.
Subcontractors should expect opportunities to be harder to find and rate growth has stabilised.
As it’s harder to find good work, subcontractors should consider focusing less on rate and focusing more on contract length, role stability and program longevity.
Our reports show that an increasing number of subcontractors are open to permanent work.
However, if you hold an NV2 or TSPV clearance and are a technical specialist, you’re likely to continue to find work for the foreseeable future.
A holistic perspective
Speed to capability remains a challenge in the enlarged APS workforce, which requires time to mature to the capability levels historically delivered by industry. This means that subcontracting will always be needed, just in critical areas.
The transition from CASG to DDA will have the following likely impacts:
Fewer short-term, transactional contracts
More targeted contracting in delivery-critical roles
Greater scrutiny on role justification
Our advice for finding subcontractor work in this market:
Be clear on your value proposition: define your scarce skills, clearance level and your delivery track record,
Consider longer contracts over higher rates,
Understand which programs align to SDIPs.
FAQs
Are Defence subcontractors losing work to APS staff?
Partially. Defence is expanding the APS workforce, particularly in administrative and low-clearance roles, reducing reliance on some subcontractors.
Which Defence subcontractors are still in high demand?
Workers with NV2 or TSPV clearances, particularly in cyber security, Defence ICT, engineering and intelligence roles, remain in strong demand.
Will subcontractors still be needed in the defence industry?
Yes. Subcontractors will continue to support delivery-critical roles, specialised technical capability, and major Defence programs such as AUKUS and REDSPICE.
How long does defence industry hiring take?
Permanent hiring in defence industry can take three to six months, which is why subcontractors are often used to maintain project momentum.
Which cities have the most Defence subcontractor opportunities?
While Canberra remains the largest hub, opportunities are increasingly growing in other major cities due to expanding Defence programs.
Photo by charlesdeluvio on Unsplash
