Australia agrees to transition to Papua New Guinea providers within ‘the quickest possible time’

Australia will retain the controversial company Paladin to run services on Manus Island but has agreed to work with Papua New Guinea towards handing over all contracts.

The $423m Paladin contract – which currently works out at a cost of at least $1,600 per day for each refugee and asylum seeker, not including food or medical care – was due to expire next week, ending the third contract extension since Paladin was engaged in late 2017.

In a joint statement the Australian home affairs department and PNG’s immigration and citizenship authority said the two governments had agreed to “a limited extension of existing contract arrangements”.

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In parallel they would also review whether current contract arrangements were fit for purpose. Paladin’s subcontracts with other companies – most of which have also been controversial – also expire on 30 June.

“The Papua New Guinea government has advised it intends to assume responsibility for service delivery and will contract local providers through an open market competitive procurement process,” the statement said.

“While procurement processes take time, Australia will work with Papua New Guinea to transition to new service providers within the quickest possible time, at which time Australian-held contracts will be terminated.”

The extension would allow PNG authorities time “to undertake its open and transparent procurement processes and to ensure services are maintained”, the statement said.

No further details were provided and the statement said neither government would provide “ongoing commentary” on future negotiations.

The PNG government was supposed to take over garrison services for the asylum seekers and refugees sent to Manus Island by the Australian government’s offshore processing regime, but at the last minute indicated it could not.

The Australian government has blamed the last minute change on its decision to engage the inexperienced and little known company through a limited tender process.

The home affairs minister, Peter Dutton, had indicated it would be extended but refused to confirm, leading to public pronouncements by PNG ministers – including the prime minister, James Marape, on Tuesday – demanding that it be handed over to the PNG government.

“We don’t intend to have foreign security companies engage in businesses like security which we can do,” Marape said.

The contract is the subject of several reviews in Australia, including one by the auditor general examining all of the government’s contracts for the offshore processing systems on Manus Island and Nauru. That audit is forecast to deliver its report in January 2020.

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Labor had called for the government to release a commissioned Ernst & Young review into the contract – ordered in March but still yet released – before it made any decision on Paladin’s renewal, but on Wednesday offered qualified support for the announcement.

“Labor welcomes the fact an open market competitive procurement process will be undertaken for future contracts in PNG, something Peter Dutton failed to do with Paladin,” Labor’s home affairs spokeswoman, Kristina Keneally, said.

“Australia still has skin in the game and it is incumbent on Peter Dutton to ensure any future contracts in PNG are fit for purpose and ensure value for money if services are being funded by the Australian taxpayer.”