This article is more than 1 year old

This article is more than 1 year old

The head of the Department of Home Affairs concedes bureaucrats awarded a controversial $423m contract to Paladin to provide services on Manus Island because of an “urgent” set of circumstances, but Mike Pezzullo denies he was “desperate”.

Officials from the home affairs department told estimates on Monday they were, in essence, forced to conduct a closed tender process for the contract because the government of Papua New Guinea advised the then Turnbull government in July it could not provide services it had signalled it would provide because it had entered a caretaker period.

The officials also told Monday’s hearing bureaucrats approached Paladin, a little-known firm, which had previously been a subcontractor at East Lorengau Refugee Transit Centre, for a quote, because major companies were not interested in tendering to provide the services because there was “too much noise around regional processing”.

Pezzullo said the department had executed the contract under special measures provisions in commonwealth procurement rules. He said they did so after seeking advice from other agencies to ensure the services would continue to be delivered after the closure of the Manus regional processing centre by 31 October 2017.

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During the hearing, the Greens senator Nick McKim queried whether that objective had been met, noting he was on Manus Island at the time of the transition, and services were not being provided. Hundreds of detainees on Manus Island remained in the closed facility without food, water or medical supplies for more than a fortnight.

Pezzullo insisted during his evidence the home affairs minister, Peter Dutton, had no involvement in the decision, apart from restating the government’s policy about the proposed transition on Manus Island when Pezzullo had asked for that clarification before making a decision on the contract.

The secretary told the hearing his “strong preference” would have been to conduct a 12-months-long tender, including with a global search, but that more protracted option wasn’t possible after PNG advised Canberra it would not be providing the services in July.

Asked whether that meant the department was desperate, Pezzullo replied: “We were dealing with an urgent situation, but we were never desperate.”

Controversy surrounding the tender has been intensifying over the past week because of a series of reports in the Australian Financial Review about the low-profile firm, which until recently listed one of its business premises as a beach shack on Kangaroo Island.

Ahead of the resumption of parliament, Labor declared there were questions to answer about the contract. Labor’s Senate leader, Penny Wong, said it was “deeply concerning” that a company with “such a poor track record” was awarded a contract worth more than $420m.

Officials from the home affairs department were asked to explain the timelines and decision-making associated with the contract on Monday, and whether they knew the company was thinly capitalised.

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They told the hearing Paladin had been approached because the company was “operating in the environment”. Officials conceded they had identified risks associated with the company in a “high risk, high value” evaluation process, one being a lack of experience with big government contracts.

The home affairs department also issued a statement, timed with the appearance before Senate estimates, saying the Paladin Group was “a global company which has delivered security and related services to a broad range of government and private sector clients across the Asia-Pacific region since 2007” and had been operating in PNG through a local entity, Paladin Solutions PNG Ltd.

The departmental statement said Paladin Solutions PNG Ltd was engaged under an initial letter of intent valued at $89m in September 2017.

The following February, the department entered into a contract with Paladin Holdings PTE Ltd valued at more than $176m for garrison and security services at the East Lorengau Refugee Transit Centre, as well as services at other sites including Hillside Haus, West Lorengau Haus and in Port Moresby, PNG.

There had been two subsequent contract extensions, running to 30 June 2019.

Officials told the hearing they were satisfied with Paladin’s performance in delivering services.