IT was Friday night of the recent ALP conference when Kevin Rudd was seen strolling past a Darling Harbour bar in Sydney.

What happened next left onlookers inside the bar agog.

A journalist at the bar waved at the Foreign Minister, beckoning him in for a chat, with his chief of staff, Phillip Green, and a press secretary in tow.

Inside were a group of nearly 10 journalists having a beer, who were soon prodding Rudd about Julia Gillard's poorly received speech to ALP delegates.

Pointedly, she had paid tribute to Labor's great prime ministers. She avoided mentioning Rudd by name. The move was regarded as stupid and graceless according to some senior ministers and attracted sympathy for Rudd.

Encouraged to air his views at the Cyren bar, the Foreign Minister needed little encouragement, openly accusing the Prime Minister of "airbrushing" him from history and making jokes about her "Toys R Us" speech.

Laughing that he was just back from visiting the heavily armed border to the dictatorship of North Korea, Rudd joked that over there leaders were literally airbrushed out of photographs.

Then, as conversation turned to the future and Gillard's pledge in her speech that "Labor says yes to the future", Rudd said something else.

"F--k the future", he laughed, literally flipping the bird in front of the assembled journalists to punctuate his remark. As he thrust his finger in the air, the crowd could barely believe their eyes.

Rudd then posed for photographs with bar staff and disappeared into the night.

But if Rudd was hoping to keep this performance under wraps, he chose the wrong audience.

Just like his other infamous chat to journalists at the Copenhagen climate change summit when he referred to the Chinese as "rat-f--kers", his expletive-laden review of Gillard's performance quickly spread.

Treasurer Wayne Swan was later heard relating stories about Rudd's bar antics to Labor colleagues.

So what, voters may ask? Plenty of people hate each other at work. They still get the job done. But there's evidence the dysfunctional relationship is starting to affect policy outcomes.

The prime example is the bungled tender for the Australia Network.

Sky News - which is part-owned by News Limited, the publisher of the Sunday Herald Sun - and the ABC were duking it out for the honours of the $223 million contract for Australia's international television service, broadcasting into 44 countries across Asia, the Pacific and the Indian subcontinent.

Rudd was no sooner on a plane last Sunday night than plans were being finalised for Monday's Cabinet meeting to scrap the entire tender process.

Previously, the oversight of the tender process had been stripped from Rudd and handed to one of his biggest internal critics, Communications Minister Stephen Conroy.

Sky News has indicated it will seek compensation, reported to be up to $2 million.

"Kevin Rudd was backing Sky. Julia Gillard was backing the ABC, as was Conroy. Sky News has got every reason to feel thoroughly aggrieved by this," Opposition communications spokesman Malcolm Turnbull said.

"This is a Government with poison at its core because of the deep, bitter antagonism between Kevin Rudd and Julia Gillard."

Conroy has also called in the Australian Federal Police over leaks he claims have compromised the tender, citing legal advice the Government has refused to release.

It is not the first time Gillard has given the impression of freezing Rudd out of a decision. He was also overseas when she announced her proposal to sell uranium to India.

Rudd later angered his colleagues when he confirmed he was not consulted, with undue haste his critics argued, barely hours after US President Barack Obama had boarded a plane home.

He was also kept out of the discussion for a time on the bungled response to live cattle exports to Indonesia.

Last Saturday night, Rudd turned up at the Cohibar for a Rainbow Labor event where delegates and Labor frontbenchers, including Anthony Albanese and Penny Wong, were celebrating a win on gay marriage.

Rudd later released a statement suggesting a possible change of heart on the question of gay marriage, noting he had been repulsed by homophobic remarks made during the broader debate and would "examine closely any legislative proposals for change".

Around midnight last Saturday, some revellers at the Cohibar were reading on their iPhones the Sunday Herald Sun's story that supporters of the former PM were urging him to challenge Gillard.

The story quoted Rudd supporters as predicting it would all come to head between February and May next year. Delegates didn't seem surprised.

But the retaliation was brutal. Gillard's backers were furious about the story and Rudd's casual stroll for the cameras the next day where he offered little in the way of denial that he was plotting a coup.

Rudd had further stoked the anger of some colleagues when he got up at the conference on Sunday and delivered the speech he believed Gillard should have given the day before.

Hitting all the marks on the economy, the global financial crisis and "the team" who worked to ensure Australia avoided recession, he effectively showed the PM how it should have been done.

Rudd pointedly named the Prime Minister and Treasurer Wayne Swan.

The payback was a leak to The Sydney Morning Herald of the sealed section of the ALP review that remains under lock and key at the ALP's national secretariat.

It implied, according to the newspaper report, that Rudd or his backers were behind the Cabinet leaks that came close to destroying Gillard's election campaign.

The payback only served to ignite further leadership speculation, confirming unnamed operatives were out to get Rudd.

One question doing the rounds in Canberra is should Gillard just sack Rudd? Certainly she has room to move since Peter Slipper became Speaker.

If Rudd quit politics and the ALP lost a by-election the numbers would be tight again, but it would not prompt the Government to topple.

The PM maintains she hasn't considered it.

"Kevin is doing a good job as Foreign Affairs Minister," she said. "So the answer to that question is no, absolutely not."

maidens@newsltd.com.au

Originally published as Rudd flips the bird and drops F-word