A handful of companies are cashing in on Australia's dwindling foreign aid budget, securing billions of dollars to do some of the work the Government used to do itself.

Government contracts show four companies have been paid close to $4 billion from the aid budget to manage long-term projects since 2014, when the Abbott government merged Foreign Affairs (DFAT) and AusAid.

Australia's aid community believes the merger left the Government without the skills and ability to manage major aid projects — something DFAT denies.

Ten companies now receive close to 20 per cent of the aid budget each year — up from 14 per cent in 2012. They have earned $712 million in the last 12 months alone.

DFAT's top four choices — Cardno Emerging Markets, Palladium International, Coffey International Development and ABT Associates — pocketed $461.8 million last financial year.

When Foreign Minister Julie Bishop announced a rethink of Australia's aid program in 2014, she said she was "agnostic about how aid is delivered", provided the best possible results were achieved.

But many in the aid community believe there has not been enough testing of whether private contractors are improving aid outcomes.

Specialist work outsources to private sector

DFAT denies it has lost aid specialisation and a spokeswoman told the ABC it has "significant in-house development capabilities".

She admitted the amount of money paid to private companies had increased, but said it was "due to a number of new, large projects".

The aid budget has dropped to its lowest levels in eight years under the Turnbull Government. ( Supplied: DFAT )

At the same time, the aid budget has dropped to the lowest levels in eight years under the Turnbull Government.

Lowy Institute fellow Jonathan Pryke said the outsourcing was a hangover from the 2014 merger, when aid positions were absorbed into a department primarily focused on diplomacy and consular services.

"This merger happened pretty quickly without a road map in place," Mr Pryke said.

"We have a lot of very smart people in the department who have competing priorities of diplomatic work and aid projects.

"In many cases, they don't have a lot of experience in either category. It seems only natural that you continue to outsource more of that responsibility to the private sector so money can be spent effectively."

Marc Purcell, chief executive of the Australian Council for International Development, said the proportion of the aid budget being paid to contractors was now almost double the amount paid to NGOs.

Too many eggs in one basket?

DFAT has a goal to reduce the number of aid contracts, claiming higher investments perform better than smaller specialist contracts.

"Consolidation reduces the administrative burden on DFAT staff, partner governments and key delivery partners," a department audit of aid projects.

In 2014, the department managed 1,319 contracts, but this fell to 986 in July last year. In turn, the average value of those contracts has increased from $20.3 million, to $25.6 million.

Save the Children's chief executive Paul Ronalds said that meant less contact with aid groups that have experience in the local communities.

Mr Pryke said consolidation made sense but there was little transparency about how these companies were using the aid money.

"The risk is you put too many eggs into one basket and that means greater risk," he said.

Last year, DFAT said its commercial aid partners had a higher "performance assessment" score than NGOs and charities.

The companies and their clients