Total legal services expenditure of agencies increased in 2007-08 to $510 million from more than $408 million in 2006-07.

Fifty-five per cent of the increase could be attributed to the inclusion of new agencies under the Financial Management and Accountability Act 1997 which had not previously reported their expenditure.

McClelland said that despite accounting for the inclusion of new agencies now reporting their expenditure, it was clear that the control of legal expenses of Commonwealth agencies was needed.

"This review will look at the existing arrangements for the procurement of legal services and provide advice on how the Commonwealth can most efficiently purchase legal services to deliver value for money for taxpayers," he said

"It will also examine how the Commonwealth can more efficiently use in-house legal services."

Until recently, comparable legal expenditure data was not available because reporting was not required in a standard form.

Following the 2006-07 figures, the Government introduced reforms to reporting in June 2008 which including a mandatory format, the implementation of common tender arrangements for agencies, increasing competition by enabling a broader range of firms to work on behalf of the Commonwealth and emphasising the use of alternative dispute resolution.

The review will be conducted by former Clayton Utz partner Sibylle Krieger and former senior public servant Tony Blunn AO and will be completed in October 2009.

- Sarah Sharples